• Pzena’s investment approach is very straightforward:
o he purchases shares in good businesses that are selling at a low price.
o He understands that it is often unrealistic to expect such opportunities to be available absent some sort of problem which causes the price of the shares to drop.
o The question Pzena and his team try to answer is whether the issue that caused the drop in price is temporary or permanent.
• ROE vs growth – which is more EPS accretive ?
o Prefer co’s with high ROE’s vis-à-vis growth rates as then growth is self sustaining and you wont need to dilute ur equity base to raise capital or leverage ur balance sheet. Infact stock buybacks can be a possibility.
• Odds & psychology
o Risk reward tradeoff
50% chance of doubling ur money ..50% of losing a qtr ..good investment bet
• Strong discipline
• Talks about reasons for buying stocks like tenet healthcare, fannie, Freddie mac,computer associates