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Pzena Investment Management's Top 4 Position Boosts in 3rd Quarter

- By James Li

Pzena Investment Management Inc. (PZN), the investment firm founded by Richard Pzena (Trades, Portfolio), disclosed this week its top four position boosts were KKR & Co. Inc. (KKR), General Electric Co. (GE), National Oilwell Varco Inc. (NOV) and Edison International (EIX).


The firm's investment philosophy stems primarily from two factors: the rank of companies from the cheapest to the most expensive and the basis of current share price to normal long-term earnings power. Pzena's top four sectors in terms of portfolio weight are financial services, health care, technology and industrials.

KKR

The firm invested in 8,741,173 shares of KKR, boosting the position 1,363.61%. Shares averaged $26.72 during the quarter; the firm increased its equity portfolio 1.16% with this transaction.

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KKR invests across multiple asset classes, including private equity, energy, infrastructure, real estate, growth equity, credit and hedge funds. GuruFocus ranks the company's financial strength 3 out of 10 on several weak indicators, which include a debt-to-equity ratio that underperforms 90% of global competitors. KKR has increased its long-term debt by over $10 billion over the past three years, a severe warning sign of declining financial strength.

Gurus with large holdings in KKR include Jeff Ubben (Trades, Portfolio)' ValueAct and Chuck Akre (Trades, Portfolio)'s Akre Capital Management.

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General Electric

The firm invested in 16,297,449 shares of General Electric, boosting the position to 33,345,586 shares. The percent change to the position for the quarter is 95.60%.

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Pzena joins several gurus, including Ray Dalio (Trades, Portfolio)'s Bridgewater Associates and Andreas Halvorsen (Trades, Portfolio), staying positive on the embattled conglomerate: although the company traded 7% higher on its announcement to accelerate the sale of Baker Hughes, a GE Co. (BHGE), GE tumbled to an intraday low of $7.76 on Friday.

National Oilwell Varco

The firm added 4,761,228 shares of National Oilwell Varco for an average price of $44.74 per share. With this transaction, the firm increased the position 107.85%.

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National Oilwell Varco engages in the design, manufacture and sale of equipment and components used in oil and gas drilling, completion and production operations. GuruFocus ranks the company's profitability 5 out of 10: although it has a solid Piotroski F-score of 6, National Oilwell Varco's operating margin underperforms 58% of global competitors. Additionally, the company's three-year revenue decline rate of 27% ranks lower than 74% of global energy equipment and services companies.

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Edison International

The firm invested in 1,113,386 shares of Edison International for an average price of $66.89 per share, boosting the position 14.21%.

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Edison International engages primarily in the generation and distribution of electric power: the company's subsidiary, Southern California Edison, supplies power to customers in a 50,000-square-mile area of Southern California. GuruFocus ranks the company's profitability 6 out of 10: even though revenues and profit margins have declined over the past three years, Edison International's Piotroski F-score ranks a solid 6 on several positive indicators, which include higher current ratios and asset turnover year over year.

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Disclosure: No positions.

Read more here:

  • Ask This Guru: GE Is Not Dead
  • Richard Pzena Trims State Street, Exits Micro Focus
  • Ray Dalio's Top 5 Buys in 3rd Quarter


This article first appeared on GuruFocus.