“To us, value is simply arithmetic that entails buying something cheap relative to the present value of its future cash flows, which we measure using normal earnings. Value is not a factor. It is a timeless and logical approach to estimating the long-term value of a business and determining whether there is a dislocation between the fundamentals and how the market perceives that value. Since there are no reliable datasets for future cash flows, other proxies, including price to book, price to earnings, or price to cash flow, are often used for historical comparisons. We don’t believe any of these metrics are true measures of value, but they are satisfactory in studying past value cycles.” —Pzena Q3 2020 Commentary