The Acquirers Podcast Legendary value investor Rich Pzena on his 30-year career and the opportunity today | S07 E15
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May 12, 2025 Rich Pzena, an investment legend and founder of Pzena Investment Management, shares insights from his 30-year journey in value investing. He discusses the parallels between today's market and the 1990s tech boom, emphasizing the importance of investing in undervalued companies. Pzena also delves into the complexities of assessing investments amidst technological changes, particularly with AI's impact on traditional sectors. His perspective on balance sheet analysis and managing client expectations offers valuable lessons for adapting to market volatility.
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Early Value Investing Anecdote
- Rich Pzena and Joel Greenblatt replicated Graham and Dodd's value investing approach by manually analyzing stock guides in 1979.
- They found that buying companies below net-net working capital and profitable was a smart and profitable strategy.
Surviving the Tech Bubble Crisis
- During the late 90s tech bubble, Pzena’s value firm underperformed for 10 quarters and faced client criticism.
- Despite pressure, they held to value principles and were rewarded when the bubble burst with strong outperformance.
Normalized Earnings Drive Valuation
- Valuation should focus on price relative to normalized earnings over a full economic cycle, not distorted moments.
- Extreme dislocations like GE during COVID showed opportunities to buy quality companies well below normalized earnings power.
