How Pzena’s 3 most unloved stocks became its biggest winners

Markets love a good story. In 2025, that story has been concentration, AI optimism, and the uneasy sense that gravity might eventually reassert itself. 

Few investors were more willing to question the narrative than John Goetz, Global Co-Chief Investment Officer and Portfolio Manager at Pzena Investment Management, whose deep value lens has long been shaped by what the market is getting wrong rather than what it agrees on.

In this Q&A, Goetz reflects on a year where extremes ruled both in valuation and sentiment. He revisits his early warnings about mega-cap dominance, unpacks how artificial intelligence distorted prices in unexpected ways, and explains how some of the most unloved stocks became the strongest contributors to performance. 

As investors look toward 2026, his insights offer a grounded perspective on where opportunity still exists beneath the market’s dominant narratives.

Q: As a deep value investor, what ultimately turned out to be the most important theme or trend for you in 2025, and how did it shape your strategy?

The growing prevalence of AI was among the most consequential and complex investment trends of the year. To be clear, we aren’t thematic investors; our goal is to build portfolios of largely idiosyncratic businesses that are uncorrelated with one another. 

But in a portfolio of 40-60 stocks, themes will invariably emerge. 

Interestingly, the AI theme has proven to inflate valuations for some companies/industries while depressing others. 

As fundamental active managers, we are tasked with assessing AI in the context of the individual businesses in which we invest – that is, determining whether potential benefits of AI aren’t being priced into valuations or whether unwarranted AI disruption fears are negatively (and erroneously) impacting valuations, resulting in compelling value opportunities that we look to exploit. 

We are also cognizant of, and continue to avoid, massive US tech companies whose valuations already reflect optimistic AI demand assumptions. 

Because we have not yet witnessed the resolution of this divergence, the disparity continues to drive opportunity into 2026.

Q: What key calls or strategies did you get right over the year, and what enabled those successes?

The top three performing stocks in our Global strategy this year are completely disparate businesses: Samsung Electronics (KRX: 005930), CVS Health Corp (NYSE: CVS) and Dollar General (NYSE: DG).

The one attribute they share is that they were each among the market’s most unloved stocks prior to 2025. 

We capitalised on investors’ extreme pessimism in these businesses by doing what we’ve done for the past 30 years: leveraging our deep fundamental research to develop a comprehensive understanding of each company’s operations, its long-term earnings drivers, and the material headwinds impacting its profitability. 

In each case, we determined that the market was overly fixated on near-term issues instead of the long-term normal earnings power of the business, which, in our view, remained unimpaired. 

As it pertains to Samsung specifically, investors’ prevailing notion was that AI data centre investment wouldn’t be particularly impactful for the memory chip giant; however, that perception changed significantly in recent months, and the stock rallied. 

Q: What investment or assumption of yours didn’t play out as expected - what did you get wrong this year, and what did you learn from it?

Our original thesis on mobile/internet/TV provider Charter Communications (NASDAQ: CHTR) (Spectrum) was predicated on cable broadband continuing to display pricing power despite the threat of market disruption from fixed wireless access (FWA) and fibre overbuild in the US. In 2024, we began to see early indications that FWA growth could be plateauing, and the company’s broadband ARPU (average revenue per user) growth remained positive. 

However, it subsequently became clear that we had underestimated the competitive threat, particularly from fibre, as Verizon and AT&T outlined increasingly aggressive expansion plans that were enabled by unanticipated technological enhancements, improving fibre’s economics. 

Our experience with Charter reinforced the importance of maintaining a disciplined process for ongoing due diligence to identify changing industry dynamics. 

While we believe our process is strong, we would have preferred to have identified the changes slightly earlier than we did.

Q: What development or event caught you most by surprise, and how did it impact your outlook or portfolio?

The Chinese tech sector’s rally in the wake of DeepSeek’s revelations has been somewhat of a welcome surprise. We own several Chinese tech businesses across our portfolios, including e-commerce and cloud computing giant Alibaba. 

We believed Alibaba (NYSE: BABA) would be able to stabilise its massive e-commerce business after losing share to JD.com and Meituan, while its dominant cloud unit would continue to grow at a respectable double-digit CAGR – well below the growth rate of US peers, and not contingent on an AI boom. 

Based on those assumptions, the stock was well within the first valuation quintile on a price-to-normal earnings basis, warranting inclusion in our portfolios. Alibaba’s e-commerce business subsequently improved, driven largely by company-specific initiatives, which was consistent with our thesis. 

We were surprised by the market’s perception of Alibaba’s position in AI development, which has dramatically improved in 2025. 

Chinese internet & cloud player Baidu (NASDAQ: BIDU) was another strong performer on the back of AI enthusiasm, and we scaled back both positions on strength. 

Q: After navigating the ups and downs of 2025, what’s the single biggest lesson you’ll carry into 2026?

When evaluating the long-term profitability of a business, one must accept that the past is not a definitive predictor of the future. 

We conduct considerable research on what “should” be true about the future based on the past, while acknowledging that changes in competition and regulation are always possible, even if the changes are irrational or destructive in the long term. 

Thus, as a research team, we must be relentless in focusing on any structural changes that occur in the businesses that we own, while also resisting the urge to overreact to temporary problems, as it’s precisely the market’s overreaction to near-term headwinds that foster some of our most compelling value opportunities.

Q: Over the past 12 months, which company has been the biggest contributor to the portfolio, and what’s one company that you’ve added recently and why?

Our Global strategy’s top contributor over the past year has been Samsung Electronics. 

The Korean tech conglomerate’s core memory business, which accounts for nearly two-thirds of its operating profit, has been benefiting from constrained supply and surging demand for DRAM chips, while its legacy smartphone business continues to perform nicely, driven by its high-end foldable models. Investor sentiment improved abruptly as it became apparent that Samsung would benefit from spiking demand in memory due to AI.

We recently added Daikin Industries (TYO: 6367), a global leader in air conditioning systems. 

The company has been hit by tariff uncertainty, currency headwinds, and persistent weakness in China – by far Daikin’s most profitable geography – amid the nation’s housing crisis. 

The stock’s forward multiple has collapsed by ~50% over the past five years, but we believe the company is largely suffering from temporary issues in multiple geographies that investors are misinterpreting as structural, while overlooking the potential for margin improvement and a renewed focus on capital efficiency, after a big investment in technology leadership, including in the US. 

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