Wallace Weitz

Wallace Weitz

Last Update: 2015-01-12

Number of Stocks: 65
Number of New Stocks: 6

Total Value: $3,399 Mil
Q/Q Turnover: 8%

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

Wallace Weitz Watch

  • Weitz Funds Analyst Corner - A Perspective on Motorola Solutions Inc.

    By Barton Hooper, CFA


    Motorola Solutions (MSI) is a global leader in the sale of public safety communication infrastructure products and services as well as commercial radio systems. The company’s public safety portfolio, which represents over 60% of sales, provides first responders with mission critical, reliable and secure communications necessary for operating during storms, fires and security events where the inability to communicate can result in disastrous consequences. MSI designs, manufactures and installs the underlying infrastructure necessary to run a network as well as the end point radios and other devices carried by local personnel. The company’s commercial radio systems are sold to a diverse set of private and public entities which need a reliable, low cost, two-way push-to-talk method of communicating with customers and employees. We believe the company is the share leader in both of its primary businesses, serving over 10,000 customers located in more than 100 countries.

      


  • Weitz Value Fund Q4 2014 Commentary

    The Value Fund’s Investor Class gained +4.0% during the fourth quarter, compared to an increase of +4.9% for both the S&P 500 and Russell 1000. For the calendar year, the Fund’s Investor Class returned +9.5% versus advances of +13.7% and +13.2% for the S&P 500 and Russell 1000, respectively. We are generally pleased with these results in light of the Fund’s conservative positioning throughout 2014. Following the sixth consecutive year of upward trending equity markets, we begin 2015 with the Fund’s estimated aggregate weighted average price-to-value (a measure of the collective discount of the stocks in our portfolios) in the mid-to-upper 80s and a more moderate residual cash position of 17% of net assets after a busy fourth quarter.



    Liberty Global (LBTYA) (+18%), Liberty Interactive (QVCA) (+22%) and Express Scripts (ESRX) (+20%) were the largest contributors to Fund performance during the fourth quarter. Liberty Global (LGI) obtained regulatory clearance for the acquisition of Ziggo, the largest cable operator in the Netherlands, and following close expects to resume aggressively repurchasing its shares. Rumors of a potential takeover attempt by British phone company Vodafone Group also helped lift LGI’s stock beginning in late November. Liberty Interactive completed the reattribution of its Digital Commerce companies to Liberty Ventures during the quarter in exchange for stock. Its core asset, shopping network QVC, reported solid third quarter results and should be a beneficiary of improved consumer health in the U.S. Against muted investor expectations, Express Scripts’ shares benefitted from steady third quarter operating results, a better than feared 2015 selling season and gradually improving customer service levels.

      


  • Weitz Investment Management Q4 Commentary

    Dear Fellow Shareholder:



    We are pleased to report another year of positive returns in all of our funds. Our conservative portfolio positioning held us back a few percentage points, and the funds trailed their respective benchmarks, but our companies as a group performed very well and that is the key to good long-term results. The fund performance table shows returns over various holding periods since inception 31+ years ago. As usual, we suggest focusing on the longer periods.
      


  • Weekly CEO Buys Highlight: LTRPA, ENH, BH, OPK, CPTA

    According to GuruFocus Insider Data, these are the largest CEO buys during the past week. The overall trend of CEOs is illustrated in the chart below:

      


  • Is It Time to Buy Avon?

    In this article, let's take a look at Avon Products Inc. (AVP), a $4.4 billion market cap company that is the world's leading direct marketer of cosmetics, toiletries, fashion jewelry and fragrances, with about 6 million sales representatives worldwide.


    Technology

      


  • Wallace Weitz Buys Discovery Communications, Sells Apple in Q3

    Wallace Weitz (Trades, Portfolio) entered the investing world at the age of 12 when he purchased his first stock. Since then, he’s made a career in what he’s called his hobby — he spent 10 years as an analyst and portfolio manager at Chiles, Heider & Co. before founding the Omaha, Nebraska-based Weitz Investment Management in 1983.


    Weitz manages four of the 10 funds at the firm and follows the value investing model. There are plenty of similarities between Weitz and his Omaha neighbor Warren Buffett (Trades, Portfolio), but Weitz has sometimes struggled to outperform the S&P 500 at a rate that justified his fees.

      


  • Graham & Doddsville Newsletter Fall 2014

    Graham and Doddville is Columbia Business School's student-led investment newsletter, co-sponsored by the Columbia Student Investment Management Association (CSIMA) and the Heilbrunn Center for Graham and Dodd Investing.


    This issue features interviews with:

      


  • Wallace Weitz Comments on Precision Castparts

    Precision Castparts (PCP) is a global, diversified manufacturer of complex metal components and products sold primarily to aerospace, power and industrial customers. CEO Mark Donegan is a first-rate operator, sound strategic thinker and highly skilled acquirer / integrator. Concerns over the health of the new commercial aircraft cycle provided us an opportunity to establish an initial position at what we believe is an attractive discount. We have been heartened by management’s more recent decisions to repurchase stock and look forward to the prospect of additional value-accretive M&A in the future.

    From Wallace Weitz (Trades, Portfolio)'s Value Fund Q3 2014 Commentary.  


  • Wallace Weitz Comments on Discovery Communications

    Discovery (DISCA) is a world-class provider of global pay-tv programming including ‘must-carry’ channels (Discovery, TLC and Animal Planet) as well as emerging and niche networks (ID, OWN and Science, among others). Non-fiction content is a wonderful business – it is cheap to produce and portable across geographies, driving excellent margins and cash flows. Discovery is especially well positioned to benefit from the long-tailed wave of increasing pay-tv adoption outside the U.S. The company generally owns the full rights to its content, providing bargaining power as the distribution ecosystem evolves. We project per-share cash flow growth in the high teens over the next several years, fueled by the international business. From today’s price, we think the stock’s return potential is adequate-to-exceptional with solid downside protection.

    From Wallace Weitz (Trades, Portfolio)'s Value Fund Q3 2014 Commentary.  


  • Wallace Weitz Comments on Microsoft

    Microsoft (MSFT) reported strong fiscal fourth quarter results in late July with attractive growth across its core franchises accompanied by sound cost discipline. Investors appear to have finally taken notice of Microsoft’s numerous strengths after several years of disproportionate focus on its flaws.

    From Wallace Weitz (Trades, Portfolio)'s Value Fund Q3 2014 Commentary.  


  • Wallace Weitz Comments on eBay Inc

    On the final day of the quarter, eBay (EBAY) announced its intention to separate into two separate publicly-traded companies – PayPal and “new” eBay – during the second half of 2015. Despite some initial excitement, investor sentiment remains lukewarm and the stock undervalued.

    From Wallace Weitz (Trades, Portfolio)'s Value Fund Q3 2014 Commentary.  


  • Wallace Weitz Comments on Berkshire Hathaway Inc

    Berkshire (BRK.B) enjoyed a relatively strong start to the year operationally with non-insurance operating earnings up 12% during the first half of 2014 despite headwinds at Burlington Northern. Buffett’s willingness to repurchase Berkshire shares at or below 120% of book value continues to provide a nice and gradually rising backstop for the stock.

    From Wallace Weitz (Trades, Portfolio)'s Value Fund Q3 2014 Commentary.  


  • Wallace Weitz's Value Fund Q3 2014 Commentary

    The Value Fund’s Investor Class declined -0.1% during the third calendar quarter, compared to a 1.1% gain for the S&P 500 and a 0.7% increase for the Russell 1000. Through the first nine months of calendar 2014, the Fund’s Investor Class increased 5.3% compared to an 8.3% gain for the S&P 500 and an +8.0% return for the Russell 1000. The Fund’s conservative bent and elevated residual cash position have been the primary drivers of our relative underperformance so far this year. As we enter the fourth quarter, we are encouraged by a growing divergence between the stock prices and business values of an increasing number of the individual companies on our “on deck” list. We have been waiting patiently for opportunities and remain watchful as the Fed looks to end its quantitative easing program during October amidst softening economic conditions across much of the globe.


    Berkshire Hathaway (BRK.B) (+9%), eBay (EBAY) (+13%) and Microsoft (MSFT) (+12%) were the largest contributors to Fund performance during the quarter. Calendar year-to-date, Valeant Pharmaceuticals (VRX) (+12%) and DIRECTV (DTV) (+25%) join Berkshire (+17%) as the Fund’s most significant positive contributors. Berkshire (BRK.B) enjoyed a relatively strong start to the year operationally with non-insurance operating earnings up 12% during the first half of 2014 despite headwinds at Burlington Northern. Buffett’s willingness to repurchase Berkshire shares at or below 120% of book value continues to provide a nice and gradually rising backstop for the stock. On the final day of the quarter, eBay (EBAY) announced its intention to separate into two separate publicly-traded companies – PayPal and “new” eBay – during the second half of 2015. Despite some initial excitement, investor sentiment remains lukewarm and the stock undervalued. Microsoft (MSFT) reported strong fiscal fourth quarter results in late July with attractive growth across its core franchises accompanied by sound cost discipline. Investors appear to have finally taken notice of Microsoft’s numerous strengths after several years of disproportionate focus on its flaws.

      


  • Wallace Weitz Comments on Avon Products

    We bought relatively small new positions in Willis Group Holdings and Avon Products in the third quarter. Avon (AVP) is a direct selling, branded beauty business undergoing a turnaround in the U.S. market. The overwhelming majority of Avon’s business value comes from its stronger positions in Latin America and other emerging markets. Our investment thesis is that well-run direct selling can be a decent business with solid margins and high returns, that the Avon brand is not fundamentally broken, and that the U.S. business is bottoming as evidenced by break-even results in the most recent quarter. Avon has a wider range of potential outcomes than our typical investment and is sized accordingly.

    From Wallace Weitz (Trades, Portfolio)'s Partners Value Fund Q3 2014 Commentary.  


  • Wallace Weitz Comments on Willis Group Holdings

    We bought relatively small new positions in Willis Group Holdings and Avon Products in the third quarter. Willis (WSH) is a leading global insurance broker. We have followed this attractive industry for many years through investments in Aon, Brown & Brown and others (including Willis under prior management). Organic revenue growth has been solid, and Willis has a near-term opportunity to expand margins through expense initiatives and restructuring savings that are likely to kick in next year. We think the stock should be revalued higher once management follows through on its pledged cost discipline and drives operating leverage.

    From Wallace Weitz (Trades, Portfolio)'s Partners Value Fund Q3 2014 Commentary.  


  • Wallace Weitz Comments on Interval Leisure

    Interval Leisure (IILG) (-37%) was the largest detractor and one of our few companies where business value declined. Our earnings estimates fell roughly 15% when Interval announced that four large, multi-year corporate relationships renewed at less favorable rates in their timeshare exchange business. We think the stock has overreacted to this news, and the company continues to add strategically to its platform.

    From Wallace Weitz (Trades, Portfolio)'s Partners Value Fund Q3 2014 Commentary.  


  • Wallace Weitz's Partners Value Fund Q3 2014 Commentary

    The Partners Value Fund’s Investor Class returned -1.4% in the third calendar quarter, compared to a +1.1% return for the S&P 500 and flat results for the Russell 3000. The largest companies were generally the strongest performers in the third quarter, most notably Microsoft (MSFT) (+12%), Berkshire Hathaway (BRK.B) (+9%) and Valeant Pharmaceuticals (VRX) (+4%) for our Fund. Conversely, small cap stocks fell sharply in July and again in September, with the Russell 2000 index finishing down 7.4% for the quarter. While smaller companies account for approximately 10% of our net assets, these stocks drove most of the Fund’s quarterly decline. Iconix Brand Group (ICON) (-14%), Redwood Trust (RWT) (-14%) and Interval Leisure Group (IILG) (-13%) were the primary small cap detractors. Energy holdings Range Resources (RRC) (-22%) and Apache (APA) (-6%) also impacted results as natural gas and oil prices dropped. We remain optimistic on the long-term outlooks for all five of these stocks, which trade at moderate to large discounts to our business value estimates.


    For the calendar year-to-date, the Fund’s Investor Class returned +2.9% compared to +8.3% for the S&P 500 and +7.0% for the Russell 3000. DIRECTV (DTV) (+25% on AT&T’s buyout offer), Martin Marietta Materials (MLM) (+30% on its acquisition of Texas Industries) and Valeant Pharmaceuticals (VRX) (+12%, and in the news for its hostile takeover battle for Allergan) benefited from the robust deal environment in different ways. Interval Leisure (IILG) (-37%) was the largest detractor and one of our few companies where business value declined. Our earnings estimates fell roughly 15% when Interval announced that four large, multi-year corporate relationships renewed at less favorable rates in their timeshare exchange business. We think the stock has overreacted to this news, and the company continues to add strategically to its platform. Other small-cap stocks that detracted from year-to-date results included XO Group (XOXO) (-25%) and Redwood Trust (RWT) (-11%). Broader themes behind the relative shortfall include our overweight position in consumer discretionary companies (the weakest sector in the market year-to-date), our lack of near-term big winners in health care and technology (the strongest sectors in the market year-to-date) and our conservative portfolio positioning in the first half of the year. We are not pleased with recent results. It is natural for our concentrated investing style to be out of step with the market at times.

      


  • Wally Weitz Q3 2014 Shareholder Letter

    Dear Fellow Shareholder:

    The U.S. economy continues to gradually expand, building on the 5+ year recovery from the Great Recession. Employment levels are improving, though progress has been slower than expected. Inflation, for now, remains subdued. As signaled and on cue, the Fed has been weaning the economy (and investors) off of the extraordinary ‘quantitative easing’ stimulus. Investors have generally shrugged off world events that might otherwise cause high anxiety (ISIS and the Middle East, Russia and Ukraine, etc.). As attention now turns to when the Fed will raise short-term interest rates, it seems plausible that volatility may intensify as the stimulus security blanket is removed.

    In the meantime, companies are taking advantage of the artificially low interest rate environment and sanguine investor sentiment. Merger activity remains robust, fueled by cheap and readily available credit. The IPO market has been very active, headlined by the successful Alibaba offering in September. Corporate treasurers continue to issue loads of debt on attractive terms, locking in generationally low interest rates for long terms. While these conditions will not last forever, they have helped opportunistic managers accelerate equity value growth at many companies.

    Investment Commentary and Outlook

      


  • Wallace Weitz's Partners Value Fund Q2 Commentary

    June 30, 2014 The Partners Value Fund returned +2.0% in the second calendar quarter, compared to +5.2% for the S&P 500 and +4.9% for the Russell 3000. The Fund’s consumer discretionary stocks contributed to returns, led by DIRECTV (DTV) (+11%). After plenty of speculation, AT&T agreed to acquire DIRECTV at a modest premium to our stand-alone valuation. Energy stocks also rose strongly during the quarter as crude oil prices remained above $100 per barrel. While Apache (+22%) participated, the Fund did not have enough energy exposure to keep pace. ADT Corporation (+17%) delivered better-than-feared quarterly earnings against low expectations.


    Interval Leisure (IILG) (-16%) was the largest detractor from quarterly results. Interval’s stock declined when the company announced that four large, multi-year corporate relationships renewed at less favorable rates in their timeshare exchange business. We estimate a one-time, roughly 15% impact to earnings in 2014 from these renewals. We think Interval’s long-term outlook remains more favorable, as the company continues to strategically add to its footprint. The Fund’s health care stocks also detracted from returns as both Valeant Pharmaceuticals (-4%) and Express Scripts (-8%) declined modestly. Valeant is embroiled in a high-profile, hostile takeover battle with Allergan (AGN), while Express Scripts lowered 2014 guidance. Both remain large, core holdings in the Fund.

      


  • Wallace Weitz's Value Fund Q2 Commentary

    The Value Fund returned +2.3% during the second calendar quarter, versus gains of 5.2% for the S&P 500 and 5.1% for the Russell 1000. Through the first six months of calendar 2014, the Fund increased 5.4% compared to gains of 7.1% and 7.3% for the S&P 500 and Russell 1000, respectively. Residual cash declined from 29.8% of net assets at the end of the first quarter to 26.5% of net assets at June 30 as we took advantage of buying opportunities in several of our existing holdings.


    Apache Corp (+22%), DIRECTV (+11%) and Pioneer Natural Resources (+23%) were the largest contributors to Fund performance during the quarter. Roughly a year ago, Apache (APA) began a significant reshaping of its business with the goal of streamlining its disparate portfolio of oil and gas assets and unlocking latent value in its stock. CEO Steve Farris and his team have made significant progress, generating a total of $9.5 billion in pre-tax proceeds from largely non-core asset sales to-date. In recent months, management has expressed confidence in its ability to further reduce the company’s exposure to its two large liquefied natural gas (LNG) projects. Investors are gradually beginning to take notice of the new and improved Apache, and we believe a more consistent and attractive self-funding growth profile is likely to help further narrow the stock’s discount to intrinsic value.

      


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