| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 9% | -4.7% | -4.7% |
Pzena's Focused Value strategy declined 4.7% net in Q1 2026, underperforming the Russell 1000 Value Index which gained 2.1%. The portfolio faced headwinds from macroeconomic concerns related to the Iran conflict, AI-related uncertainty across industries, and idiosyncratic developments affecting key holdings. Healthcare, financials, and technology sectors were the largest detractors, with Humana declining on disappointing Medicare Advantage rate updates, Capital One falling on credit quality concerns, and Cognizant weakening despite strong earnings due to AI disruption fears. The manager views these AI-related concerns as overblown and added to positions on weakness. Industrials and energy contributed positively, with Dow benefiting from oil price spikes and Avnet gaining on data center demand. The team initiated positions in Accenture and CDW, taking advantage of AI-driven valuation compression. Despite recent challenges, management believes the current environment represents an exceptional long-term opportunity given attractive starting valuations and a rich opportunity set.
Pzena maintains a concentrated value approach, viewing current market volatility and AI-related fears as creating exceptional long-term opportunities to acquire quality companies at attractive valuations.
The manager believes the current environment represents an exceptional long-term opportunity given the portfolio's starting valuation and the breadth, magnitude, and quality of the opportunity set, despite recent performance headwinds.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 28 2026 | 2026 Q1 | ACN, AVT, C, CDW, COF, CTSH, DAL, DOW, DOX, FMC, HUM, OSK, SWKS | energy, financials, healthcare, industrials, technology, value |
HUM COF CTSH ACN CDW |
Pzena's value strategy declined 4.7% in Q1 amid Iran conflict volatility and AI disruption fears. The manager added to beaten-down positions including Humana and Cognizant, viewing concerns as overblown, while initiating new positions in Accenture and CDW at attractive valuations. Despite headwinds, they see exceptional long-term opportunities in the current environment. |
| 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 | - | Pzena's Focused Value strategy underperformed in Q4 as momentum stocks continued their leadership. Key detractors included FMC, Baxter, and Skyworks on disappointing results, while Dollar General and Citigroup contributed positively. The team initiated Knight-Swift during the freight downturn and trimmed outperformers. Management sees attractive valuation dispersion creating opportunities for patient value investors. |
| Oct 24 2025 | 2025 Q3 | BAX, C, CHTR, CVS, MGA, PPG, RHI, SOLV, TEL | financials, healthcare, industrials, underperformance, value | - | Pzena Focused Value underperformed in Q3 despite positive contributors from financials. The strategy initiated positions in discounted PPG Industries and spinoff Solventum while exiting Charter Communications due to competitive pressures. Healthcare and financials exposure remains high with attractive valuations. The manager continues targeting undervalued companies with improvement catalysts, adding to Baxter despite temporary headwinds. |
| Aug 25 2025 | 2025 Q2 | BMY, C, COF, DG, DOW, EQH, GPN, OSK, RHI, SWKS, TEL, WFC | consumer discretionary, financials, M&A, positioning, tariffs, value |
GPN OSK DG OSK |
Pzena's value strategy slightly underperformed in Q2 2025 as trade policy volatility weighed on markets. Strong performance from discount retailer Dollar General and financials like Citigroup offset weakness in staffing and chemicals. The firm initiated Oshkosh while trimming strength in Wells Fargo and others. Despite macro uncertainty, valuations remain attractive across sectors. |
| Mar 31 2025 | 2025 Q1 | BAC, BAX, CVS, DAL, DG, EQH, FNF, LKQ, NWL, PVH, UHS | consumer, earnings, financials, healthcare, Trade Policy, value | - | Pzena's Focused Value strategy returned 1.0% in Q1 but lagged its benchmark amid trade policy uncertainty. Healthcare and consumer staples outperformed while technology and consumer discretionary detracted. The manager added to positions at attractive valuations in LKQ Corp and Universal Health Services while trimming strength in financials. Portfolio valuations remain extremely attractive with primary exposure to healthcare and financials. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
AIAI-related uncertainty and fears of disruption weighed on multiple portfolio holdings including Cognizant, Accenture, and CDW. The manager views these AI fears as overblown and sees potential benefits from rising demand for process automation enabled by AI. |
Artificial Intelligence Automation Technology Disruption Services |
ValueThe manager emphasizes the portfolio's starting valuation and describes the current environment as an exceptional long-term opportunity given the breadth, magnitude, and quality of the opportunity set despite recent performance challenges. |
Valuation Opportunity Undervalued Long-term Quality | |
Data CentersData center buildout and robust data center demand drove positive performance for Avnet and created optimism for Oshkosh's aerial work platform products used in AI-related data center construction. |
Infrastructure Technology Construction Equipment | |
| 2025 Q4 |
OilOil represents the cheapest major asset class globally, trading at near-record lows relative to gold despite balanced fundamentals. The closure of the Straits of Hormuz has created the largest supply shock in industry history, disrupting 20 million barrels per day. Non-OPEC supply growth is slowing dramatically, with U.S. shale production plateauing outside the Permian Basin. |
Crude Oil Brent WTI Shale OPEC |
Natural GasNatural gas ranks in the 99.5th percentile of historical undervaluation relative to equities. U.S. production growth has concentrated entirely in the Permian Basin, with other shale regions declining. Once the Permian's current gas production surge runs its course, supply growth should plateau and eventually decline, setting the stage for materially higher prices. |
Henry Hub LNG Shale Gas Permian | |
SilverSilver surged 51% in Q4 and over 140% for the year, staging a dramatic catch-up rally relative to gold. This magnitude of silver outperformance has historically marked important turning points, suggesting investors should consider reducing precious metals exposure in the short term as a sell signal has been triggered. |
Precious Metals Gold Silver Ratio | |
CopperCopper markets have moved back into surplus with exchange inventories rising to levels last seen in 2003. Despite strong performance in 2025, the fundamental outlook has shifted bearish as Chinese demand slows and new supply comes online. Inventories now represent roughly 17 days of global demand, placing them in the top 20% of observations over thirty years. |
Base Metals China Demand LME | |
Platinum Group MetalsPGMs continued their powerful advance with platinum and palladium each surging 28% in Q4. Policy reversals in the U.S. and Europe are unwinding the aggressive push toward electric vehicles, supporting longer-term demand for internal combustion engines and auto-catalysts. The bearish narrative built on rapid EV adoption is being rewritten. |
Platinum Palladium Auto Catalysts Electric Vehicles | |
UraniumSurging uranium demand is meeting a fragile supply base, creating structural tightness in the market. The uranium fuel cycle faces significant supply constraints while global nuclear capacity expansion accelerates, particularly in emerging markets seeking reliable baseload power generation. |
Nuclear Fuel Cycle Supply Deficit | |
| 2025 Q3 |
ValueThe strategy focuses on undervalued companies with characteristics for improved valuations. PPG Industries is trading at a discounted valuation due to concerns around tepid organic growth, which the manager sees as overly discounted. Solventum presented an attractive entry point due to operational challenges and margin pressure concerns. |
Undervalued Discounted Attractive |
| 2025 Q2 |
Discount RetailDollar General appreciated meaningfully as same-store sales improved and gross margins expanded, driven by increased traffic from middle-income consumers trading down to the discount channel. The company benefited from improved inventory control measures and a labor boost that helped reduce theft. |
Trade Down Retail Margins Inventory Traffic |
Capital MarketsFinancials delivered strong performance supported by benign credit losses, favorable stress test outcomes, a more accommodative regulatory backdrop, and robust capital markets activity. Citigroup delivered low single-digit revenue growth and declining expenses, resulting in improved returns on capital. |
Credit Regulation Returns Revenue Activity | |
Merchant AcquiringGlobal Payments announced a transformational acquisition of Worldpay during the quarter. After extensive due diligence, the strategic rationale became clear as the combined entity will process $4 trillion in annual payment volumes and offer Global Payments the opportunity to expand distribution of its Genius point-of-sale product. |
Payments Acquisition Volumes Distribution Synergies | |
| 2025 Q1 |
ValueValue stocks outperformed the broad market in the quarter, though the Focused Value strategy underperformed its benchmark. The manager emphasizes that starting point valuations remain extremely attractive in the portfolio today. |
Value Undervalued Discount Attractive |
Trade PolicyUncertainty regarding U.S. trade policy triggered fears of a worsening environment for economic growth. PVH Corp declined on fears related to China's Unreliable Entity list, likely in response to U.S. trade policy, with concerns around tariff impacts on companies like Newell Brands. |
Trade Tariffs China Policy |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Apr 28, 2026 | Fund Letters | Pzena Focused Value strategy | HUM | Humana Inc. | Healthcare Plans | Health Care Plans | Bull | New York Stock Exchange | CMS, health insurance, healthcare, Medicare Advantage, Regulatory, Value | Login |
| Apr 28, 2026 | Fund Letters | Pzena Focused Value strategy | COF | Capital One Financial Corporation | Credit Services | Consumer Finance | Bull | New York Stock Exchange | AI impact, banking, consumer finance, credit cards, credit quality, geopolitical risk | Login |
| Apr 28, 2026 | Fund Letters | Pzena Focused Value strategy | CTSH | Cognizant Technology Solutions Corporation | Information Technology Services | IT Services | Bull | NASDAQ | AI disruption, Digital transformation, IT services, organic growth, Outsourcing, Technology Consulting | Login |
| Apr 28, 2026 | Fund Letters | Pzena Focused Value strategy | ACN | Accenture plc | Information Technology Services | IT Services | Bull | New York Stock Exchange | AI implementation, Cyclical Recovery, Digital transformation, Enterprise Services, It consulting, Process automation | Login |
| Apr 28, 2026 | Fund Letters | Pzena Focused Value strategy | CDW | CDW Corporation | Information Technology Services | Technology Hardware, Storage & Peripherals | Bull | NASDAQ | AI Adaptation, market leadership, portfolio expansion, technology distribution, Technology Reseller, value-added services | Login |
| 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 |
| Jun 30, 2025 | Fund Letters | Pzena Focused Value strategy | OSK | Oshkosh Corporation | Industrials | Machinery | Bull | NYSE | Aerial Work Platforms, Cyclical Recovery, Defense Contractor, Industrial Equipment, manufacturing, Postal Vehicles, Replacement Cycle, Vocational Vehicles | Login |
| TICKER | COMMENTARY |
|---|---|
| HUM | Medicare Advantage (MA) insurer Humana was the largest individual detractor after CMS (Centers for Medicare and Medicaid Services) proposed a disappointing preliminary MA rate update for 2027. Additionally, management projected rapid growth in its MA membership in 2026, which investors fear may reflect overly rich plan benefit design relative to peers. We view these risks as more timing-related than thesis-changing and added to our position on weakness. |
| COF | Within financials, despite reporting results that reflected a stable credit environment, credit card issuer Capital One declined, driven by fear that macroeconomic risk from the Iran conflict, coupled with AI's potential to weigh on employment in the future, could pressure consumer credit quality. |
| CTSH | Leading IT services provider Cognizant was weak, despite reporting robust 4Q earnings with peer-leading organic growth, due to fears around AI disruption to the services industry more broadly. We continue to see these fears as overblown and added to our position on weakness. |
| DOW | Commodity chemicals producer Dow rallied as oil prices spiked, which is expected to tighten global polyethylene markets and benefit Dow due to its cost-advantaged footprint in North America. |
| AVT | Semiconductor distributor Avnet gained after reporting strong earnings and guidance driven by robust data center demand. We funded these purchases by trimming Delta Air Lines, money center bank Citigroup, and Avnet, all on strength. |
| OSK | Shares of machinery producer Oshkosh also rose on optimism that the AI-related data center buildout will drive demand for its core aerial work platform products. |
| ACN | During the quarter, we initiated a position in Accenture plc, the bellwether IT consulting and services provider. The stock has been weak due to a cyclical slowdown in IT services spending and fear that AI will negatively impact the services industry broadly, which has pushed Accenture's valuation to its lowest point in over a decade. Ultimately, we view Accenture as an essential facilitator of enterprise digital transformation that we believe could benefit from rising demand for process automation enabled by AI. |
| CDW | We also initiated a position in CDW Corporation, the largest value-added technology reseller in the U.S. Two factors have weighed on the shares: AI-related fears that we believe are misplaced, and recent margin pressure from investments to broaden the product portfolio, which we view as strategically sound. |
| SWKS | We added to our existing position in Skyworks, a leading RF component supplier to smartphone manufacturers, on weakness driven by fears that elevated memory chip pricing could pressure smartphone volumes. |
| DOX | We also increased our position in Amdocs, a provider of CRM and billing software to telecom companies, on recent weakness. |
| DAL | We funded these purchases by trimming Delta Air Lines, money center bank Citigroup, and Avnet, all on strength. |
| C | We funded these purchases by trimming Delta Air Lines, money center bank Citigroup, and Avnet, all on strength. |
| FMC | We also exited our position in agricultural chemical company FMC, as destocking and loss of product exclusivity were mismanaged and stretched the balance sheet to a point where the risk of permanent impairment has expanded substantially. |
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| No Recent Buys Data | |||||
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