Wallace Weitz

Wallace Weitz

Last Update: 2014-08-14

Number of Stocks: 62
Number of New Stocks: 2

Total Value: $3,311 Mil
Q/Q Turnover: 9%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Wallace Weitz Watch

  • Weitz Investment Management Comments on DIRECTV

    DIRECTV (DTV) is on the receiving end of a takeover offer—it is the target of an acquisition by AT&T. DIRECTV had grown its business steadily over the years and had increased its value per share significantly by making very large share repurchases. AT&T is offering roughly twice the price we paid for our first shares about three years ago. We have mixed feelings about giving up our holdings but it has been a good investment for us.


    From Wallace Weitz (Trades, Portfolio)'s Q2 Shareholder Letter.

      


  • Weitz Investment Management Comments on Berkshire Hathaway

    Berkshire Hathaway (BRK.A)(BRK.B) is also an active acquirer, both at the parent company level and through its various subsidiaries. Warren Buffett (Trades, Portfolio) is holding cash reserves of $40-50 billion and has expressed strong interest in making more very large acquisitions. Berkshire recently agreed to swap its long-time holdings of the Washington Post Company (now called Graham Holdings) for a TV station and Berkshire shares held by that company. When completed, this tax-efficient transaction will reduce the number of Berkshire shares outstanding and add another cash generating asset to the fold. Berkshire is constantly growing and evolving as a group of operating businesses but also, in extreme stock market dislocations like 2008, Warren has the courage and capacity to make bold investment moves. Berkshire has been a holding in our stock funds continuously since our firm opened in 1983.


    From Wallace Weitz (Trades, Portfolio)'s Q2 Shareholder Letter.

      


  • Wally Weitz Q2 Shareholder Letter

    In many ways, the second quarter of 2014 was a continuation of the past several quarters. After a weather-induced first quarter dip in GDP, the U.S. economy resumed its modest recovery from the “Great Recession” of 2007-09. The Federal Reserve “tapered” its quantitative easing (QE) program but still purchased $310 billion of bonds during the first half of the year. U.S. stocks continued to drift up—the conventional wisdom being that while valuations were not compelling, as long as the Fed was providing “liquidity” and near-zero interest rates, it was safe to continue buying. In fact, failure to keep buying exposed investors to the risk of being left out of the continuing bull market.

    We have been wary for some time about the level of stock prices relative to underlying business values. We own some excellent companies and they continue to grow in value, but in many cases, their stock prices have risen even faster. Price sensitivity and investment discipline dictate that we sell the expensive and if reasonably priced replacements are not available that we hold cash. So, our cash reserve levels remain elevated in the mid- to upper-20% range. This cash “anchor” held back second quarter and first half returns, but we think the “opportunity cost” of holding out for better values is slight and that we will be rewarded for our patience.

    While QE has had an indirect effect on stocks, bond prices have been impacted directly and significantly. The resulting bond market rally has produced positive total returns (interest income plus capital appreciation) for longer-term bonds, but has left prices artificially inflated and yields suppressed. The Fed can maintain this (surreal?) situation for a long time (it already has), but eventually bond buyers will insist on being paid more (higher yields) on their investments. Our Short-Intermediate Income Fund holds a relatively short, high quality portfolio. We think it will provide reasonable protection for bond investors when reality returns to the bond market.

    Investment Commentary and Outlook

      


  • Weitz Investment Management Comments on Wesco Aircraft Holdings

    We initiated a small position in Wesco Aircraft Holdings (WAIR) during the quarter. Wesco is a distributor and supply chain manager to the commercial and military aerospace markets. The company should benefit from the multi-year commercial aerospace build-out that is underway. We expect this tailwind to provide visible growth through at least 2017. Wesco also has an opportunity to provide more services to large defense contractors as funding pressures force the industry to become more efficient. If the company can improve margins along the way, we think the resulting earnings growth could provide reasonable-to-good return potential for the stock.

    From Wallace Weitz (Trades, Portfolio)'s first quarter 2014 report.  


  • Weitz Investment Management Comments on Brown & Brown

    We also added a new position in insurance broker Brown & Brown (BRO) when the stock fell below $29 in February. The company's business model generates high operating margins and strong free cash flow. We expect management to remain disciplined acquirers of culturally compatible companies. In the meantime, Brown & Brown would benefit from an increase in insurable exposure units in the middle-market economy. Said more simply, as "Main Street" recovers, Brown & Brown should do well.

    From Wallace Weitz (Trades, Portfolio)'s first quarter 2014 report.  


  • Weitz Investment Management Comments on eBay Inc.

    Finally, eBay Inc. (EBAY) made its return to the Value Fund after a relatively brief period of ownership during 2008/2009. The company recently concluded a public battle with billionaire activist Carl Icahn (Trades, Portfolio) over whether to separate its namesake online commerce platform eBay.com from PayPal, its rapidly growing mobile payments platform. We saw merit in both sides of the argument, but believed the two businesses were worth considerably more than where they were trading regardless of outcome. Both Marketplaces and PayPal have strong competitive positions and are reinvesting heavily to protect and extend their advantages. We believe EBAY shares are worth roughly $70 today

    From Wallace Weitz (Trades, Portfolio)'s first quarter 2014 report.  


  • Weitz Investment Management Comments on Pioneer Natural Resources

    Pioneer Natural Resources (PXD) is a producer of oil and gas with significant positions in Texas in the Permian Basin and Eagle Ford shale. A relatively sharp reversal in investor sentiment toward domestic oil during the first quarter afforded us the opportunity to begin building a position in Pioneer below $170 per share. We funded our PXD purchase via the sale of Southwestern Energy (SWN), effectively swapping into a more attractively priced producer with a clearer path to per share production and NAV growth. Pioneer's main area of investment – the horizontal redevelopment of the Northern Midland basin – generates some of the highest cash margins per barrel in North America. In many ways, Pioneer is the oil version of gas producer Range Resources (RRC), another Fund holding. It boasts a tremendous amount of visible, low-risk reserves with multiple shale layers available to exploit underneath the same acreage. Its financial flexibility and the Permian's more mature infrastructure base are additional advantages. We believe Pioneer's NAV is roughly $250/share.

    From Wallace Weitz (Trades, Portfolio)'s first quarter 2014 report.  


  • Wally Weitz Q1 2014 Letter To Investors

    April 1, 2014


    Dear Fellow Shareholder:


    The U.S. stock market wobbled a little in January, dipping 6% over the course of two weeks, but went on to set new record highs in late March. The bull market which began in March of 2009 is now five years old. This makes for very happy reading in the one, three and five year performance tables for our stock funds.

      


  • Weitz Funds' Analyst Corner - A Perspective On Liberty Media Corporation

    By Drew Weitz



    Liberty Media (LMCA) owns interests in companies across the media, entertainment and communications industries. The largest investments include publicly traded Sirius XM Holdings, Charter Communications and Live Nation Entertainment, as well as fully owned subsidiary The Atlanta National League Baseball Club (the Atlanta Braves). Liberty is led by its founder and Chairman John Malone and CEO Greg Maffei.

      


  • Wallace Weitz's First Quarter 2014 Letter to Shareholders

    Dear Fellow Shareholder:


    The U.S. stock market wobbled a little in January, dipping 6% over the course of two weeks, but went on to set new record highs in late March. The bull market which began in March of 2009 is now five years old. This makes for very happy reading in the one, three and five year performance tables for our stock funds.

      


  • Weitz Funds' Analyst Corner - A Perspective on the ADT Corporation

    By Drew Weitz


    The ADT Corporation (ADT) is the leading provider of monitored home security service in the United States and Canada. The company possesses the strongest brand in the security industry, evidenced by its 6.5 million residential and small business customers – more than five times the number of its next largest competitor. In addition to traditional alarm monitoring, ADT is expanding its offerings to include interactive services (e.g. remote arm/disarm) and home automation services (e.g. climate/lighting control, physical lock/unlock of doors) for an incremental fee. The company was spun-off from Tyco International (TYC) in September 2012.

      


  • Wallace Weitz Fourth Quarter 2013 Commentary

    Dear Fellow Shareholder: 2013 was a terrific year for our stock funds. Gains for the year ranged from +28% for Hickory to +39% for Research. We are in the fifth year of economic recovery from the “Great Recession” of 2007-2009 and nearly five years from the bottom of the bear market that ended in March of 2009, so the table below showing one, three and five year results looks very good. 


      


  • Omaha’s Other Oracle Wallace Weitz - Top Holdings in Review

    Being known as The Other Oracle of Omaha is a good thing. Wallace “Wally” Weitz of Wallace R. Weitz & Co., is based in Omaha, Neb. His updated portfolio includes 60 stocks, one of them new, a total value of $2.65 billion, with a quarter-over-quarter turnover of 5%. The Weitz portfolio is weighted with top sectors: consumer cyclical at 17.5%, financial services at 15.6%, technology at 13.3% and health care at 13%. The stocks bought by Weitz are averaging a 12-month return of 28.02%. In 2012, he returned 19.72%. His 25-year cumulative return is 11.6% annually.

    Weitz's approach to value investing combines Ben Graham's price sensitivity and insistence on a margin of safety. Guru Weitz shares the conviction that qualitative factors that allow a company to have some control over its destiny, such as historical book value or reported earnings, can be more important than statistical measurements.  


  • Weitz Funds - A Perspective on TransDigm Group

    Analyst Corner: A Perspective on TransDigm Group
    September 30, 2013  


  • Wally Weitz Third Quarter Letter to Shareholders

    Dear Fellow Shareholder:

    Our stock fund returns in the third quarter and first nine months of 2013 have been very strong.  


  • Waiting for Gold Rain, Wally Weitz Does "Unnaturally Well"

    “Investing is a marathon,” Guru Wallace Weitz told the Weitz Fund shareholders in his second quarter letter, adding: “We face an ongoing series of decisions as to which companies to own, what price to pay, and when to be disciplined about holding out for the right opportunity. The fact that several of our stocks have performed unnaturally well this year gives us a measure of “cover” for our defensive positioning. We feel very confident that our patient, conservative approach will continue to serve us well. Believe me, when stocks become truly cheap again, we will follow Warren Buffett’s advice:

    When it’s raining gold, go out with a bucket, not a thimble.”  


  • Wallace Weitz's 3 New Q2 Buys

    Wallace Weitz’s Weitz Investments oversees $4 billion for clients and has had an excellent year so far. Its value fund returned 17.9% in the first half, outpacing the S&P 500’s 13.8%. While extended QE pumped up the markets further in the second quarter, Weitz hesitated to call a short-term market direction in his second quarter letter. As a result, he avoids taking any extreme positions in his portfolios but held ample cash at quarter-end after it sold shares of companies whose share priced approached his estimates of fair value. “But we still own a group of companies that we believe have excellent long-term prospects,” Weitz said in his letter.

    When stocks do get cheap again, he added, “we will follow Warren Buffett’s advice: ‘When it’s raining gold, go out with a bucket, not a thimble.’”  


  • Wallace Weitz Comments on Iconix

    Iconix (ICON--$29)(ICON) Iconix is a licensing business. It buys the rights to license brands such as Candie’s, London Fog and Peanuts. The products are manufactured by others and sold through major retailers, usually on multi-year contracts. The result is very predictable licensing revenues generated with little capital investment and thus very high returns on invested capital.

    From Wallace Weitz’s second quarter 2013 letter to shareholders.  


  • Wallace Weitz Comments on Liberty Interactive

    Liberty Interactive (LINTA--$23)(LINTA) Liberty Interactive’s QVC continues to grow in the U.S., Europe and Japan. The company also owns 37% of HSN (Home Shopping Network). QVC and HSN employ both video and online retailing platforms that give them significant cost advantages over traditional (bricks and mortar) retailers. We trust management to both grow the business and buy back shares, thus increasing the value per share of our holdings.

    From Wallace Weitz’s second quarter 2013 letter to shareholders.  


  • Wallace Weitz Comments on Redwood Trust

    Redwood Trust (RWT--$17)(RWT) We have owned Redwood shares since its founding in 1993. Redwood is a “value investor” in the residential and commercial mortgage markets. We know management well and trust their judgment. The mortgage market was rocked by the recent bond market commotion, but Redwood ought to be able to continue to build its business. Redwood’s current dividend yield is 7.5% and we would expect the company to raise its dividend over time.

    From Wallace Weitz’s second quarter 2013 letter to shareholders.  


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