At The Motley Fool, we believe that going against the Wall Street wave can help investors capitalize on opportunities the overall market may be missing. Like us, hedge funds try to look for investments that will generate serious market-beating returns. By tracking the decisions of gurus like Richard Pzena, we can better understand how these managers have made billions.

Meet Pzena Investment Management 
Richard Pzena started up Pzena Investment Management on the first day of 1996. Since then, the multinational hedge fund has enjoyed impressive returns by sticking to a simply defined strategy: "Buy good businesses when they go on sale."

Before investing, Pzena looks for five crucial criteria. Like The Motley Fool, Pzena looks for stocks with a history of attractive long-term returns. Each candidate must have a low price relative to its normal earnings power. Current earnings must be below normal, and management must also have a plan for restoring those earnings to their former luster. Finally, any investment must have tangible downside protection.

What's Pzena been buying?
Every quarter, any fund managers overseeing more than $100 million must publicly disclose their holdings at the end of the quarter through the Securities and Exchange Commission in a form 13-F. Although the form doesn't disclose short positions or intraquarter trades, it can illuminate long stock bets.

To better decipher this 13-F data, we turned to Motley Fool partner AlphaClone, a research and investment-management firm that develops investment strategies based on hedge funds' public disclosures.

In its most recent quarter, Pzena Investment Management managed $11.8 billion across 124 holdings. Financials and tech stocks together make up more than half of the fund's assets, with Wells Fargo and TCF Financial among the new stocks the fund added during the first quarter of 2011.

Pzena made some major additions to some of its holdings, especially Mueller Water Products, increasing its position there by almost 350%. Mueller specializes in water delivery and measuring products.

Here are Pzena Investment Management's 10 largest positions (by value) and associated share-count changes, as of March 31:

  1. Hewlett-Packard (NYSE: HPQ) -- increased 22.4%
  2. ExxonMobil (NYSE: XOM) -- reduced 9.9%
  3. Northrop Grumman (NYSE: NOC) -- reduced 4.1%
  4. Allstate (NYSE: ALL) -- increased 7.1%
  5. CA Technologies (Nasdaq: CA) -- increased 12.5%
  6. Omnicom Group (NYSE: OMC) -- reduced 8.2%
  7. L-3 Communications Holdings (NYSE: LLL) -- reduced 4.2%
  8. JC Penney (NYSE: JCP) -- reduced 23.4%
  9. Citigroup (NYSE: C) -- increased 7.7%
  10. TE Connectivity (NYSE: TEL) -- reduced 24.6%

Selected Q1 2011 commentary
Here's where the firm is winning and losing, and making new bets, at the moment:

  • Current winner: ExxonMobil did well, increasing 16% in the first quarter. The stock comprises fully 4.4% of the total portfolio.
  • Current loser: Citigroup fell 6.6% in the first quarter of 2011. It accounts for 2.4% of the entire portfolio.
  • New bets: The biggest new additions were Molson Coors Brewing and Royal Dutch Shell, each of which made up 1.4% of the total portfolio.

So there you have it -- the blow-by-blow of Pzena Investment Management's latest moves. Tell us what you think in the comments section below.

Company data provided by AlphaClone LLC, a San Francisco-based research and investment-management firm that tracks hedge-fund public disclosures. For more information on the firm's investment approach, visit AlphaClone.