Pzena Investment Management, Inc. (PZN) Q2 2012 Earnings Conference Call July 25, 2012 10:00 AM ET Executives Richard S. Pzena - Chairman, CEO and Co-Chief Investment Officer Gregory S. Martin - CFO Analysts Ken Worthington – J.P. Morgan Marc Irizarry – Goldman Sachs Group, Inc. Presentation Operator
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Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which these statements are made. The company does not undertake to update such statements to reflect the impact of circumstances or events that arise after the date these statements were made. Investors should however consult any further disclosures the company may make in the reports filed with the SEC.In addition, please be advised that because of the prohibitions on selected disclosure, the company as a matter of policy does not disclose material that is not public information on our conference calls. If one of your questions requires the disclosure of material non-public information, we will not be able to respond to it. Thank you. As always I’ll turn the call over to Rich, but first I’d like to review some of our financial highlights. We reported non-GAAP diluted EPS of $0.07 per share and $4.5 million in non-GAAP diluted net income. Revenues were $18.3 million for the quarter and our operating income was $8.4 million. I’ll discuss our financial results in greater depth in a few minutes. Let me now turn the call over to Rich, who will discuss our view of the investing environment. Richard S. Pzena Thanks, Greg. First, I would like to make a few comments on the investment environment, which has been heavily influenced by macroeconomic events, particularly in Europe, followed by how our firm is reacting to the challenges and opportunities it has created. Global equity markets were once again buffeted by fear and pessimism, which returned during the second quarter. Investors became re-obsessed with the continuing debt crisis in the Eurozone and on weakening economic data in the U.S. and China. For the third year in a row the slow healing process coming out of the global financial crisis has led to enough uncertainty for investors to continue to seek a questionable safety of over priced government bonds, high dividend yielding and non-cyclical equities.
While this doesn’t make it easy to stay the course as value investors, it does make it ultimately very profitable to do so. The history of value cycles as we’ve noted in the past, is to see great value opportunities created in those periods where economic visibility is the murkiest. The current economic environment is not nearly as frightening as in early 2009, yet the valuations of many cyclical businesses are approaching the levels reached then.Cyclical industries such as housing, and matured technology businesses are selling at or close to historically low valuations. Financials are selling at relative price to book valuations that put them in close proximity where they were in March 2009. The timing of exactly how this will play out is still uncertain. But one thing is clear to us, significant value is created when investor spears become so great that they’re willing to throw the baby out with the bath water as investor seem to be doing today. Rather than to come to the fear that is driving under valuation, a true value manager gets excited when value opportunities abound. Today many of our developed market portfolios are amongst the cheapest in our firm’s history. However, one characteristic of value investment – investing especially when investing before the [chaos] per share price improvement is apparent is that it requires time for improvement to be recognized and rewarded in share prices. Read the rest of this transcript for free on seekingalpha.com