During the first quarter, Wallace Weitz (Trades, Portfolio) of Weitz Investment Management did not see any new opportunities and instead sold off five holdings, including acquisition target DirecTV.
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Weitz sold all 268,570 of his shares in DirecTV for an average price of $86.38 per share. Over the past few quarters, Weitz gradually trimmed the stake as the stock increased, as shown in the graph below.
According to the Q1 shareholder commentary, Weitz sold when the stock approached the estimated business value.
DirecTV currently trades at $90.69 with a P/E ratio of 15.5 and P/S ratio of 1.35. Over the past five years, EBIT per share increased almost 23%, reporting at $10.05 in 2014. The operating margin largely remained flat, and in 2014 was 15.42%.
DirecTV is the target in an acquisition by AT&T (T), a $49 billion deal that is currently under review by the U.S. Justice Department and FCC. The Wall Street Journal reported an approval of the deal could be weeks away, with regulators unlikely to raise significant concerns.
During the first quarter, Ken Fisher (Trades, Portfolio) also sold out of his holding in the stock, while Mario Gabelli (Trades, Portfolio) and James Barrow (Trades, Portfolio) trimmed their positions.
Walt Disney Co (DIS, Financial)
Weitz sold out of 19,000 shares in Walt Disney for an average price of $100.89 per share. Over the past year, the stock price rose 33% and currently trades at $109.40.
Walt Disney’s business predictability is rated as a perfect 5 stars, which indicates consistent revenue and earnings growth. However, the stock may be overvalued according to the DCF calculator, which estimates a fair price of $82.16, which gives a -33% margin of safety.
EBIT per share increased 17% over the past five years, recording at $6.48 in 2014.
The current dividend yield is 1.1%, which is close to the five-year low. The payout ratio is 25%.
He sold 9,500 of his shares in eBay, which traded for an average price of $56.66 during the quarter. The stock increased 14% over the past year, and is currently trading at $58.30.
Net income in 2014 was just $46 million, down from $2,856 million the year before due to high tax provision. The operating margin has remained flat over the past five years, recording at 19.63%.
The current P/E ratio is 24.4, while the P/S ratio is 4.1.
iShares Russell 3000 Index ETF (IWV, Financial)
Weitz sold his 2,310 shares in the Russell 3000 Index for an average price of $122.72 per share. The price of the ETF increased 13% over the past year, and is now priced at $125.47 per share. He initiated the holding in Q4 2014.
Chris Davis (Trades, Portfolio) also sold out of his position during the quarter.
Apache Corporation (APA, Financial)
Weitz also divested Apache, selling 1,030 shares at an average price of $62.93 per share. He has been trimming the position every quarter since Q2 2014.
Apache is an energy company that explores for and develops gas, crude oil, and natural gas liquids. The stock declined 29% over the past year, and currently has a forward P/E ratio of 131.58 and P/S ratio of 2.
Like many other energy companies, Apache suffered in FY 2014 due to low oil prices. EBIT per share dropped to $-7.23, down from $11.28 the year before. Additionally, net income was $-5,403 million that year.
“We sold our stake in Apache during the fourth quarter to focus our capital in two higher conviction producers, Range Resources and Pioneer Natural Resources, with better assets trading at similar discounts to our calculated intrinsic value,” Weitz explained in the shareholder letter.
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