Pzena Investment Management's Large Cap Focused Value strategy experienced an upward trend during the third quarter of 2025, although its performance did not surpass that of the broader value benchmark. This period saw notable contributions from specific holdings, reflecting a dynamic market environment influenced by technological advancements and shifting economic policies. The strategy's investment approach emphasizes acquiring high-quality businesses at undervalued prices, a philosophy that guided its portfolio adjustments and stock selections throughout the quarter.
During this quarter, Citigroup emerged as a significant positive influence on the portfolio's returns. The financial giant's robust performance was primarily driven by its second-quarter earnings, which exceeded market expectations. Analysts observed comprehensive revenue expansion across its various business segments, coupled with strong operational leverage. This indicated a healthy underlying business model capable of generating substantial earnings, reinforcing Pzena's investment thesis in the company.
Another key performer was TE Connectivity, a leading provider of industrial connectors. The company's stock rallied following its earnings report, which highlighted robust demand for its products, particularly those integrated into artificial intelligence data center infrastructure. The surging interest in AI technologies fueled a significant portion of this demand, showcasing TE Connectivity's strategic positioning within a rapidly evolving technological landscape.
In line with its value-oriented philosophy, the strategy initiated a new position in PPG Industries during the quarter. PPG, a prominent global coatings supplier, presented an attractive investment opportunity. Its shares were trading at a valuation discount, largely due to investor concerns regarding its relatively modest organic growth compared to industry peers. Pzena's assessment, however, likely identified these concerns as temporary, seeing long-term value in PPG's market position and potential for future recovery.
The broader U.S. market indices recorded gains during the quarter, underpinned by persistent optimism surrounding artificial intelligence and the anticipation of a more accommodating monetary policy. This sentiment was further bolstered by an interest rate reduction implemented in September. The technology sector, in particular, demonstrated exceptional strength, with growth stocks showing a significant lead.
This period underscores the efficacy of a focused value strategy in identifying undervalued assets with strong fundamentals. Despite broader market trends, a meticulous bottom-up research approach allowed for the capture of opportunities in companies poised for growth, irrespective of immediate market sentiment. The strategic acquisition of PPG Industries, alongside the continued strong performance of existing holdings like Citigroup and TE Connectivity, illustrates a commitment to long-term value creation through disciplined investment choices.
