Weitz Funds' Brad Hinton in Barron's Interview Discussing Stock Picking, ICON, MSFT, WFC, AON, Others
This is the time of year that many fund managers prophesize about the year ahead for stocks.
But Brad Hinton, a portfolio manager with Weitz Funds, would rather keep the focus on only those particular stocks that he truly understands.
Like his mentor, Wally Weitz, the founder of Omaha, Neb.-based Weitz Funds and a seminal value investor, Hinton is a bottom-up stockpicker who seeks out companies of all sizes that are trading at some discount to what an informed buyer might pay for that business.
Over the past three years, the fund family's flagship Weitz Value Fund (ticker: WVALX) has generated an annualized return of 16.8%, a 3.3 percentage-point increase over the Standard and Poor's 500's total return, including dividends, according to Morningstar.
Recently Hinton talked to Barrons.com by phone about some of his favorite stocks.
Barrons.com: What's a stock that you've bought a sizable position of lately that you can share with us?
Hinton: Iconix Brand Group (ticker: ICON) is a stock we've bought recently. [Editor's Note: Formerly known as Candie's, the company, which has a $1.2 billion market cap, owns and licenses brands to retailers and manufacturers mostly in the apparel and footware industries. Its brands include Joe Boxer, London Fog, Danskin, and Starter.] They control 28 brands and essentially it's a royalty stream business. It's really a capital-light business model because they are not bearing any of the inventory risk; essentially, they are just getting a royalty stream from the retailers who sell their products. The manufacturing is also outsourced. So almost all of the revenue stream drops to the bottom line. It's a very high-operating margin business. They recently announced a share repurchase for the first time as well, looking to take advantage of the stock-market volatility. We are always looking for free-cash-flowing companies.
Q: But with all this cash, why aren't they paying out a dividend?