In the third quarter, Wallace Weitz was a net sellers into the third quarter rally. He exited eBay after the company announced plans to sell a majority interest in its Skype unit. Investors cheered the news and bid the stock up to our estimate of intrinsic value. He also cut our managed care position in half to 3.5% of net assets; and we trimmed shares of several media-related holdings, though many still increased as a percent of assets as their stock prices rose faster than he sold. Finally, he eliminated very small positions in Realty Finance and EOG Resources.
In the quarterly letter, Wallace stated:
The Value Fund continues to tilt toward our best larger company ideas, with more than 60% of the Fund’s stock investments in companies with market caps greater than $10 billion. The Fund also remains relatively concentrated, with the ten largest holdings representing 47% of net assets. The Fund’s residual cash position was 19% of net assets at quarter end.
These are his top holdings:
No. 1: Berkshire Hathaway Inc. (BRK-B), Weightings: 11.47% - 57,582 Shares
Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in a number of diverse business activities. The most important of these is the property and casualty insurance business conducted nationwide on a direct basis and worldwide on a reinsurance basis through a number of subsidiaries collectively referred to as the Berkshire Hathaway Insurance Group.. Berkshire Hathaway Inc. had an annual average earning growth of 1.7% over the past 10 years.In a recent interview, Wallace told Morningstar:
Berkshire is our largest holding and in many ways our favorite stock. It is huge and conservatively financed so it may not have as much upside potential as some stocks. However, we believe it is a perfect combination of ingredients for this economy and stock market. Warren has taken advantage of the financial crisis and made a number of terrific investments over the past year, and if the "green shoots" are real and the bear market is over, we think Berkshire has lots of upside potential. If, on the other hand, the recovery is weak and we face several years of stagnation or slow growth (quite possible), Berkshire's fortress balance sheet will allow us to sleep well.
No. 2: Redwood Trust Inc. (RWT), Weightings: 5.8% - 6,241,755 Shares
REDWOOD TRUST INC. is a self-advised and self-managed real estate investment trust. It specializes in acquiring and managing real estate mortgage assets which may be acquired as whole loans or as mortgage securities reperesenting interest in or obligations backed by pools of mortgage loans. Redwood Trust Inc. has a market cap of $1.05 billion; its shares were traded at around $13.5 with a P/E ratio of 52 and P/S ratio of 1.9. The dividend yield of Redwood Trust Inc. stocks is 7.4%. Redwood Trust Inc. had an annual average earning growth of 38.3% over the past 5 years.No. 3: Liberty Media Corp. Interactive Common S (LINTA), Weightings: 5.78% - 8,782,580 Shares
Liberty Media Corporation owns a broad range of electronic retailing media communications and entertainment businesses and investments. Its businesses include some of the world's most recognized and respected brands and companies including QVC Encore Starz IAC/InterActiveCorp Expedia and News Corporation. Liberty Media Corp. Interactive Common S has a market cap of $6.81 billion; its shares were traded at around $12.02 with and P/S ratio of 0.9. Liberty Media Corp. Interactive Common S had an annual average earning growth of 20.8% over the past 5 years.In the same Morningstar interview, Wallace answered the following question with regard to media content and distribution issues:
Question Weitz Value has a sizable stake in media businesses. What is your view on the value of content and how media companies can monetize it in the future?
It is impossible to generalize about the value of "content." If you can make something once (e.g., a book or movie) and sell it millions of times, that's great. If you can get a few small payments on each of millions of obscure pieces of content (e.g., songs), that's also great. Unique, very popular programming like ESPN can be extremely valuable while a 4th-best shopping or movie channel may have little value. has built QVC into a retailing powerhouse and has enhanced it with an online business that may surpass the video version. Newspapers have found that their content is not nearly as valuable as it once was because of the Internet as a rival distribution channel. I would say that both content and distribution can be very profitable but that neither is automatically "king."
No. 4: Liberty Global Inc. Series C (LBTYK), Weightings: 5.25% - 3,895,670 Shares
Liberty Global Inc. Series C has a market cap of $27.84 billion; its shares were traded at around $21.71 .No. 5: Dell Inc. (DELL), Weightings: 4.54% - 4,960,509 Shares
Dell Inc. is a premier provider of products and services required for customers worldwide to build their information-technology and Internet infrastructures. Dell through its direct business model designs manufactures and customizes products and services to customer requirements and offers an extensive selection of software and peripherals. Dell Inc. has a market cap of $29.16 billion; its shares were traded at around $14.91 with a P/E ratio of 13.1 and P/S ratio of 0.5. Dell Inc. had an annual average earning growth of 10.7% over the past 10 years. GuruFocus rated Dell Inc. the business predictability rank of 3.5-star.No. 6: TEL AND DATA SYS (TDS-S), Weightings: 4.48% - 2,518,100 Shares
Telephone & Data Systems is a diversified telecommunications corporation. Through its strategic business units U.S. Cellular and TDS Telecom TDS operates primarily by providing cellular and local telephone service. TDS builds value for its shareholders by providing excellent communications services in growing closely related segments of the telecommunications industry. Tel And Data Sys has a market cap of $1.41 billion; its shares were traded at around $56.8 with a P/E ratio of 15.68 and P/S ratio of 0.28. The dividend yield of Tel And Data Sys stocks is 1.56%.GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and Wallace Weitz for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
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