Wallace Weitz

Wallace Weitz

Last Update: 08-14-2017

Number of Stocks: 72
Number of New Stocks: 1

Total Value: $2,269 Mil
Q/Q Turnover: 1%

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

Wallace Weitz Watch

  • Wally Weitz's 3rd Quarter Value Matters

    Dear Fellow Investor,

      


  • Wally Weitz Podcast Interview Transcript

    Holly: Hi. Welcome to the GuruFocus podcast. I’m Holly, and I am the editor of GuruFocus, and I am here with Wally Weitz. He is the owner of the Weitz Investments, and that’s in Omaha, where another famous investor you may have heard of is also, an investor, Warren Buffett (Trades, Portfolio).

    He manages four billion there at his investment firm, and we’re very fortunate to be able to speak with him today. Hi, Wally. How are you?  


  • Interview With Star Investor Wally Weitz: GuruFocus Podcast Ep. 6

    Leading value investor Wally Weitz discusses his winning strategy for selecting stocks and his perspective on expensive markets in this episode of the GuruFocus Podcast.


    Weitz, who manages the $4 billion Weitz Investment Management, has more than 40 years’ experience applying a Ben Graham-style approach to investing. A conservative investor, he seeks stocks that trade at a significant discount to the price a private owner would pay for the entire company.

      


  • Wally Weitz Comments on Liberty Ventures

    Liberty Ventures (NASDAQ:LVNTA) (+18%), one of the more complicated members of John Malone’s Liberty family, is a top ten holding of the Fund and was the quarter’s top contributor. During the quarter, Ventures announced an agreement to acquire General Communications (GCI), the largest cable provider in Alaska. The deal will also create a much more straightforward company, principally cable assets in Alaska and shares of publicly traded Charter Communications and Liberty Broadband. Investors immediately cheered this simplification, particularly the elimination of its tracking stock structure, and bid Ventures’ shares higher. While a positive first step, we are further encouraged by the flexibility the new company will have to ultimately realize the value of its holdings in Charter and Liberty Broadband.


    From Wally Weitz's second-quarter Partners III Fund commentary.

      


  • Wally Weitz Comments on Twenty-First Century Fox

    In addition to exiting Interval Leisure, we also closed our position in Twenty-First Century Fox (NASDAQ:FOXA). Media companies in general have seen heightened volatility as investors wrestle with the proliferation of entertainment options available to today’s consumer. In this rapidly changing environment, we have greater conviction that cable providers, given their ability to offer broadband Internet service, have a stronger hand to play–and the cable industry represents a significant portion of the Fund’s invested assets. Thus, as Fox shares recovered from recent declines, we elected to close the position. The Fund also eliminated a small position in National CineMedia. Valuation also drove trims of Liberty Expedia Holdings and Redwood Trust.


    From Wally Weitz's second-quarter Partners III Fund commentary.

      


  • Wallace Weitz's 7 Largest Sales of the 2nd Quarter

    Managing a portfolio of 72 stocks, Wallace Weitz (Trades, Portfolio) sold the following stocks during the second quarter:


    Weitz closed his holding of ILG Inc. (NASDAQ:ILG) with an impact of -1.97% on the portfolio.

      


  • Wally Weitz's Partners III Opportunity Fund 2nd Quarter Commentary

    The Partners III Opportunity Fund’s Institutional Class returned +0.59% in the second calendar quarter, compared to +3.09% for the S&P 500 and +3.02% for the Russell 3000. For the calendar year to date, the Partners III Opportunity Fund’s Institutional Class returned +5.86%, compared to +9.34% for the S&P 500 and +8.93% for the Russell 3000.


    Although the Fund delivered positive absolute returns in the second quarter, our conservative positioning continues to restrain performance relative to the indices. As described more fully in our Quarterly Letter to Investors, we believe that stocks (and bonds) remain expensive, and we have been unwilling to chase the handful of stocks driving the indices higher. Nevertheless, against a backdrop of continued strong index returns, the Fund’s short positions in ETFs tracking the S&P 500 (+3%), Nasdaq 100 (+4%), and Russell 2000 (+3%) collectively represent the largest detractor to quarterly performance. Among our long positions, we also experienced pressure from Liberty Global’s European tracking stock (-11%) as investors grew increasingly frustrated by inconsistent near-term operating performance, particularly execution of its new build plans at U.K. subsidiary Virgin Media. We remain confident in Liberty’s management and long-term strategy and believe its shares more than discount near-term operating woes.

      


  • Wally Weitz to Join GuruFocus for Podcast

    As a renowned investor and resident of Warren Buffett (Trades, Portfolio)’s hometown, Weitz is often dubbed the "Other Oracle of Omaha.”


    Weitz founded Weitz Investment Management in 1983, where he continues to invest based on the same premise he started with: “Own a group of strong business purchased at deeply discounted stock prices.”

      


  • Strong Management, Moats and Earnings Power Attract Wallace Weitz


    "In 1973, we moved to Omaha and I did research and managed accounts for a regional brokerage firm. There I got the message that I should pay attention to Warren Buffett (Trades, Portfolio). That was the most important bit of advice I’ve ever received." -Wallace Weitz (Trades, Portfolio) in a 2016 interview with GuruFocus

      


  • Wally Weitz Comments on Liberty Global

    The various Liberty entities offer a variety of subscription-based cash flow generators. Liberty Global (NASDAQ:LBTYA) is a large European cable company, which we think is very undervalued at $31 vs. our estimated value of $43. Its Latin American assets will soon be spun off into a separate company, and we expect the Liberty management to use the same consolidation “playbook” to build a valuable Latin American version of Liberty Global. Investors have been disappointed by the recent pace of quarterly progress at both Global and the Latin American subsidiary, LiLAC, but we believe that putting strong, subscription-based businesses in the hands of Liberty management is a great prescription for building business value.

    Liberty’s ownership in SiriusXM (Liberty SiriusXM Group) dates back to 2009 and the depths of the Great Recession. Sirius was on the brink of bankruptcy and Liberty lent them about $400 million. The loan had a very high yield (and was repaid in under a year) but also included a “kicker” in the form of a virtually free option to acquire 40% of the company. That option was exercised and is now worth over $10 billion. Management is busily working on extracting full value from the Liberty holding company that owns its Sirius stake.

    Cable TV and broadband internet providers are among our favorite types of businesses, and Charter Cable is the second-largest cable company in the U.S. Charter recently purchased Time Warner Cable and Bright House Networks and is integrating them into the Charter system. This process will take another two to three years, and when completed, Charter’s shares should be worth considerably more than the current $337. We do not own Charter directly, but we do own it indirectly through Liberty Broadband and Liberty Ventures.

    Liberty Broadband is a pure play on Charter, holding about 0.3 shares of Charter for every Broadband share. Ventures is a holding company that owns Charter shares and Liberty Broadband shares. The shares of both Broadband and Ventures offer ways to buy Charter at a discount to its current price. If Charter’s value increases, we should be doubly rewarded as Liberty extracts full value for the Charter shares we have bought at a discount. Nothing is ever simple with Liberty and John Malone, but investors are generally very well-served.

    From Wallace Weitz (Trades, Portfolio)'s June 2017 Value Matters letter.   


  • Wally Weitz Comments on Berkshire Hathaway and Bank of America

    Most of our assets are invested in companies we have owned for many years, but the companies themselves have not been standing still. Berkshire Hathaway (NYSE:BRK.A) has been in our clients’ accounts continuously since 1976, but today’s Berkshire is very different from that of 40, 30, 20 or even 10 years ago. Recent headlines trumpet Berkshire’s $12 billion profit on its Bank of America (NYSE:BAC) investment. In fact, that investment was made in 2011 when Buffett lent BAC a badly needed $5 billion. Berkshire received a convertible preferred stock with a 6% yield ($300 million per year) convertible into BAC shares worth over $17 billion today. Berkshire’s internal rate of return on this investment is about 18% per year.

    Berkshire currently holds about $100 billion in cash available for future deals. Investments like BAC (and similar lifelines thrown to Goldman Sachs and General Electric (NYSE:GE) in 2008) are rare and tend to arise in times of economic stress. Neither we nor Warren can predict when the next “deal” will present itself, but Warren and his investment team are both patient in waiting for great opportunities and bold in seizing them.

    From Wallace Weitz (Trades, Portfolio)'s June 2017 Value Matters letter.   


  • Wally Weitz Comments on DXC Technology

    During this extended period of high valuations, the turnover in our stock funds has been low. We have added a few new stocks to our portfolios, but they tend to fall into the category of intermediate-term “trades” (as opposed to our preferred long-term “investments”). For example, DXC Technologies (NYSE:DXC) is the successor to Computer Sciences Corporation (CSC), an undermanaged and somewhat troubled IT consulting company that brought in new management in 2012. The new CEO, Mike Lawrie, has considerable turnaround experience and by 2016 had CSC back on track. Earlier this year, CSC acquired Hewlett Packard’s Enterprise Services business (originally Ross Perot’s EDS). The plan is to use the same playbook Lawrie used with CSC to make the combined company more profitable. If they are reasonably successful over the next three to four years, we believe that DXC can earn $9-10 per share and sell at a modest 12-13 times earnings. This is not “home run” material, but it would represent a nice increase over today’s $76 per share. More importantly, achieving these gains is not dependent on low interest rates, a strengthening economy or technological breakthroughs.

    From Wallace Weitz (Trades, Portfolio)'s June 2017 Value Matters letter.   


  • Wally Weitz's June 2017 Value Matters

    Dear Fellow Investor,


    Our equity Funds rose the first half of the year, including modest returns in the second quarter. Some outpaced their benchmarks, while others trailed. Our bond funds continued to find ways to earn some income in spite of continued (artificially) low interest rates. While our stock returns have been subpar in recent years, even if that were not the case, we would (as always) point readers to the longer-term results. Returns for all of our Funds over various intervals can be found on the performance table on our website (weitzinvestments.com).

      


  • Wallace Weitz Sells Avon Products, Berkshire Hathaway, Fossil

    Wallace Weitz (Trades, Portfolio) manages a portfolio composed of 81 stocks with a total value of $2.383 billion. During the first quarter the guru sold shares in the following stocks.


    The position in TransDigm Group Inc. (TDG) was closed with an impact of -2.58% on the portfolio.

      


  • Weitz Funds Comments on United Parcel Service

    United Parcel Service (NYSE:UPS) is a package delivery company and a provider of supply chain management solutions. Over the past several years, the growth of e-commerce has created challenges for UPS during its peak holiday shipping season. While the market can not quite decide whether the onslaught of less profitable residential delivery volume is beneficial, UPS has announced plans to significantly accelerate capital spending in anticipation of even more residential delivery volume. Investors’ lack of faith in management’s intended path led to this most recent sell off. We believe the company’s efforts toward a more streamlined holiday shipping experience will bear fruit in time, and we expect the company’s stock price will eventually reflect this stepped-up commitment to its customers.


    From Weitz Funds' first-quarter 2017 Balanced Fund shareholder letter.

      


  • Weitz Funds Comments on Compass Minerals

    Compass Minerals (NYSE:CMP) produces and sells salt, specialty plant nutrition and chemical products around the world. Despite a strong fourth quarter, Compass stock was a weak performer due to concern around the lack of snow in their geographic footprint. Though the company guided to 12% volume growth in salt in 2017 as municipalities restocked, prices still remain under pressure, as a lot of volume was contracted in the summer months when inventories were high. The news was similarly mixed at their sulfate of potash (SOP) operation. While prices seem to be stabilizing and volume growth was exceptional, cost improvements have been slow to materialize. As a result, much of the inventory they are selling now was produced under their higher legacy cost structure. We believe the salt business will recover as soon as we have a “normal” winter and recent capital investments lower their costs even more. In addition, SOP prices are stabilizing and once Compass adjusts its cost structure to the current reality, the business will return to earning historic returns on capital.


    From Weitz Funds' first-quarter 2017 Balanced Fund shareholder letter.

      


  • Weitz Funds Comments on Anheuser-Busch InBev

    Anheuser-Busch InBev (NYSE:BUD) is the clear-cut leading global beer company after its recent acquisition of SABMiller plc. The stock briefly traded above $130 last fall due to high expectations for the combined company’s prospects and strong investor demand for stable, cash-generative consumer staples companies. Anheuser-Busch InBev’s stock declined later in the year due in part to temporary challenges in its Brazilian business. At $110, we think the company trades at a moderate discount to value for a world-class business, with a roadmap to significantly higher earnings in three years.


    From Weitz Funds' first-quarter 2017 Balanced Fund shareholder letter.

      


  • Weitz Funds Comments on Texas Instruments

    Texas Instruments (NASDAQ:TXN) is the market leader in the sale of analog and embedded semiconductors. Shares rose on optimism that the available market for the company’s products will continue to expand as industrial and automotive markets include more electronic content in their products. The company’s long-term strategy of moving incremental business to its low-cost 300 millimeter wafer manufacturing process also continues to expand the long-term margin horizon for the company. Furthermore, Texas Instruments has continued to benefit from investor recognition of the company’s execution, disciplined capital allocation (returning all excess cash to shareowners) and the potential that the market for analog semiconductors is becoming slightly less cyclical, as the industry has matured and consolidated.


    From Weitz Funds' first-quarter 2017 Balanced Fund shareholder letter.

      


  • Weitz Funds Comments on Laboratory Corp. of America

    Laboratory Corp. of America (LabCorp) (NYSE:LH) operates as a diversified global life sciences company through two segments: LabCorp Diagnostics and Covance Drug Development. Following a choppy 2016 third quarter, LabCorp’s fourth quarter operating results resumed a more normal course. Test volumes rebounded at LabCorp Diagnostics, as did new clinical trial bookings at Covance. The company closed the year on a high note, with sales increasing 11% and cash earnings per share up 12% versus the prior year. Underlying clinical lab trends remain stable and the pace of clinical research outsourcing continues to be healthy. Anticipated cuts in Medicare reimbursement for lab tests and a gradual shift by payers toward value-based payment models are creating new, long hoped-for opportunities for LabCorp’s low cost lab network. LabCorp announced the acquisition of two valuable hospital- based labs during the first quarter and continues to see a steady flow of attractive potential ‘tuck-in’ lab acquisition opportunities. The company’s combination of durable organic growth and significant reinvestment runway remains appealing to us as long-term investors


    From Weitz Funds' first-quarter 2017 Balanced Fund shareholder letter.

      


  • Wally Weitz Comments on Visa

    Visa (NYSE:V) is the world’s largest electronic payment network. The company recently closed on its acquisition of Visa Europe, allowing it to provide a fully integrated network to clients, which should result in increased market share and lower costs. We believe Visa will compound nicely as worldwide payment volumes grow, developing countries switch from cash to cards, and the company uses its technology and network to participate in all forms of electronic payments.


    From Weitz Funds' first-quarter 2017 Research Fund shareholder letter.

      


  • Wally Weitz Comments on Donnelley Financial Solutions

    Donnelley Financial Solutions (NYSE:DFIN) is a financial compliance company recently spun out of RR Donnelley. Primarily a printing company, RR Donnelley split itself into three public companies to ascribe better value to its individual parts, as the printing industry is facing secular decline. While 40% of Donnelley Financial’s revenue is still print related, the remainder is software and services, which not only have better margins than print but are also growing organically. We believe the market has misvalued Donnelley Financial due to lack of transparency around the cost structure and the compliance services segment’s sensitivity to capital markets transactions. Generally, when a company is spun-off, there is inevitable noise in its income statement as it seeks to recreate the services that its parent previously provided. The result is a host of duplicative costs, which can temporarily mask earnings power. More recently, Donnelley Financial’s quarterly results and guidance disappointed investors, as capital market activity was down 15% affecting an otherwise high margin segment. While the recent results are disappointing, we believe a recovery in the capital market is forthcoming and will allow Donnelley Financial to demonstrate more normalized earnings power, aggressively pay down debt, and continue to invest in compliance technology solutions, which are in high demand.


    From Weitz Funds' first-quarter 2017 Research Fund shareholder letter.

      


  • Wally Weitz Comments on National CineMedia

    National CineMedia (NASDAQ:NCMI) produces the “FirstLook” pre-show, a collection of advertising and entertainment content shown in movie theaters prior to show time. The operating business (NCM LLC) is jointly owned by public shareholders (ticker: NCMI) and the founding three theater circuits: AMC, Regal Entertainment and Cinemark. During the first calendar quarter, AMC reached an agreement with the Department of Justice over its proposed acquisition of Carmike (a partial owner and client of theater advertising competitor Screenvision). The most significant of these conditions requires AMC to reduce its stake in NCM from 39% to fewer than 5% over a period of 24 months; the goal being to encourage continued competition in theater advertising services between the two competitors. The sale of these shares has put pressure on the stock price and represents a significant volume for the buyers to absorb. Nevertheless, we continue to believe NCM’s unique position and network creates an opportunity for advertisers to reach their audiences. During the quarter we took advantage of the price decline and added to our position.


    From Weitz Funds' first-quarter 2017 Hickory Fund shareholder letter.

      


  • Wally Weitz Comments on ILG Inc.

    ILG, Inc. (NASDAQ:ILG) is a provider of non-traditional lodging, encompassing a portfolio of leisure businesses, from exchange and vacation rental to vacation ownership. A year ago, the stock price was suffering under the combined weight of both a general market swoon and a share overhang from ILG’s imminent merger with Starwood’s timeshare business. That merger ultimately put over half (70+ million shares) of this small-cap company’s stock in the hands of large-cap hotel investors. One year later, the market has marched steadily higher, and the bulk of those shares have likely found homes in the portfolios of more appropriate investors. As such, the stock price has rebounded and reclaimed much of what it had lost in the year prior. We continue to like the prospects and valuation of the newly combined entity.


    From Weitz Funds' first-quarter 2017 Hickory Fund shareholder letter.

      


  • Wally Weitz Comments on Formula One

    Formula One (NASDAQ:FWONA), which began in 1950, is an iconic global motorsports business. The 2017 FIA Formula One World Championship spans 20 races in 20 countries across five continents. In January, Liberty Media closed on its 100% acquisition of the Formula One racing series. Upon closing, the Liberty Media tracking stock was renamed Liberty Formula One Group. Investors are enthusiastic about the highly regarded executive and newly appointed chairman, Chase Carey. Furthermore, the potential to grow Formula One under Liberty Media’s guidance–greater sponsorship prospects, the potential for new races and venues to grow awareness of the sport, and new opportunities to bring Formula One content to digital platforms excite investors.


    From Weitz Funds' second-quarter 2017 Hickory Fund shareholder letter.

      


  • Weitz Funds' Comments on Zoe’s Kitchen

    Zoe’s Kitchen (NYSE:ZOES) is a small, growing restaurant concept serving “better for you” Mediterranean cuisine. While 2016 was a weak year for many restaurants, Zoe’s fared better than most, though they were not immune. Worries around weakening U.S. consumer spending and the lack of near-term earnings continue to depress the stock price. We believe this is temporary and think the next several years of growth can produce outsized, though likely volatile, returns. We continue to add to our position on share price declines.


    From Weitz Funds' first-quarter 2017 Research Fund shareholder letter.

      


  • Wally Weitz Comments on Wesco Aircraft Holdings

    Wesco Aircraft Holdings (NYSE:WAIR) is the world’s leading distributor and provider of supply chain services to the global aerospace industry. During the past year, the company has continued its transition to a “One Wesco” culture, which includes an implementation of continuous improvement initiatives. In addition, the company has won several new contracts. These new contracts have required funding of upfront inventory and preparation expenses, temporarily depressing free cash flow. We believe Wesco is making significant progress in transforming its business, which we expect to soon be reflected in reported results.


    From Wally Weitz's first-quarter 2017 Partners III Opprtunity Fund shareholder letter.

      


  • Wally Weitz Comments on LiLAC Group

    LiLAC Group (NASDAQ:LILA) is a tracking stock distributed by Liberty Global with respect to its businesses in Latin America and the Caribbean. LiLAC’s stock has struggled throughout the last year as management revealed additional unanticipated headaches with the May 2016 acquisition of Cable & Wireless Communications. After meeting with management, we believe the company understands the nature of the problem and is set to grow from this reset base. We anticipate that in the coming quarters, LiLAC will demonstrate the benefits they saw in this acquisition, beginning with identifying operating synergies for investors. Management further demonstrated their confidence in their revised outlook by announcing a $300 million stock repurchase authorization.


    From Wally Weitz's first-quarter 2017 Partners III Opprtunity Fund shareholder letter.

      


  • Weitz Funds' Analyst Corner: A Perspective on Dollar Tree Inc.

    Dollar Tree (NASDAQ:DLTR) operates a network of approximately 14,400 discount variety stores across the United States and Canada under the Dollar Tree, Dollar Tree Canada and Family Dollar brands. During the summer of 2015, Dollar Tree completed a transformational acquisition of competitor Family Dollar Stores for $8.8 billion and now operates under two distinct banners. The legacy Dollar Tree segment operates 6,400 stores, offering everyday basics, seasonal, closeout and promotional merchandise at a fixed $1 price point ($1.25 CAD in Canada). The Family Dollar segment operates approximately 8,000 general merchandise discount retail stores focused on providing customers basic necessities such as diapers, food and paper products as well as seasonal merchandise at prices between $1 and $10.

      


  • Weitz Value Fund Comments on Dollar Tree

    Dollar Tree (NASDAQ:DLTR) operates a network of approximately 14,400 discount variety stores under the Dollar Tree, Dollar Tree Canada and Family Dollar brands. The legacy Dollar Tree concept is the last remaining true dollar store, where every item is a dollar. Its balanced offering of consumables (food and toilet paper) and more discretionary items (toys, stationery and party supplies) has generated consistently attractive financial results, with same store sales rising 22 of the past 23 years. Family Dollar, acquired for $8.8 billion in 2015, focuses more heavily on basic necessities such as diapers, food and paper products at prices between $1 and $10. Dollar Tree is early in the process of improving Family Dollar’s operating results, executing what we believe is a credible plan toward closing the gap in financial performance that exists with its nearest competitor Dollar General. Dollar stores’ unique combination of low prices and convenience continues to resonate with low- and middle-class consumers, providing attractive future store growth opportunities and durable excess cash flow. Portfolio Manager Dave Perkins profiles Dollar Tree in more detail in this quarter’s Analyst Corner.


    From Weitz Value Fund first quarter 2017 commentary.

      


  • Weitz Value Fund Comments on United Parcel Service

    United Parcel Service (NYSE:UPS) is a package delivery company and a provider of supply chain management solutions. Over the past several years, the growth of e-commerce has created challenges for UPS during its peak holiday shipping season. While the market can not quite decide whether the onslaught of less profitable residential delivery volume is beneficial, UPS has announced plans to significantly accelerate capital spending in anticipation of even more residential delivery volume. Investors’ lack of faith in management’s intended path led to this most recent sell off. We believe the company’s efforts toward a more streamlined holiday shipping experience will bear fruit in time, and we expect the company’s stock price will eventually reflect this stepped-up commitment to its customers.


    From Weitz Value Fund first quarter 2017 commentary.

      


  • Weitz Value Fund Comments on TransDigm Group

    TransDigm Group (NYSE:TDG) is a designer, producer and supplier of engineered aircraft components for use on commercial and military aircraft. The prospect of rising interest rates and accusations of rigged/fake bids from a critical short report pressured TransDigm’s stock during January. The company’s levered balance sheet, while married with historically consistent cash flows, increases the company’s sensitivity to potential declines in profitability. In his first several weeks in office, President Trump targeted the cost of specific programs at several of TransDigm’s larger peers. While it remains to be seen what, if any, lasting impact this scrutiny will have on growth and cash flow, with TransDigm’s shares close to our estimate of intrinsic value, we elected to close our position in the stock with a nice gain.


    From Weitz Value Fund first quarter 2017 commentary.

      


  • Weitz Value Fund Comments on Range Resources

    Range Resources (NYSE:RRC) is an independent producer of natural gas and natural gas liquids (NGLs) based in Fort Worth, Texas, with operations in the Marcellus shale and emerging Terryville field. Range Resources stock weakened during the first quarter as mild winter weather once again put downward pressure on natural gas prices. The company’s higher-than-projected 2017 drilling budget and 20% 2018 production growth target likely also raised fears that Range’s balance sheet could once again deteriorate in the event of a prolonged downturn in gas prices. March supply/demand was kinder than January and February, however, leaving


    natural gas storage levels in better shape entering injection season than a year ago (approximately 20% lower). Longer-term demand fundamentals for gas remain attractive, and improving oil prices together with international transport capacity have provided a spark for natural gas liquids prices that should benefit Range’s cash flow. We believe Range shares are undervalued, assuming mid-cycle natural gas prices of $2.75 or higher.

      


  • Weitz Value Fund Comments on Liberty Global

    Liberty Global (NASDAQ:LBTYA) is the largest international cable company, with operations in 14 countries providing video, broadband Internet, fixed-line telephone and mobile services to its customers. Liberty Global’s shares were strong in the first calendar quarter and made up some of the ground that had been lost during the prior year. The company’s quarterly results were solid, but shares have likely been driven upward as speculation of deals in the media industry has heated up of late, including revived speculation of a potential Vodafone transaction. We view Liberty Global as a standalone provider of broadband and Pay-TV services as an attractive opportunity, and although a potential acquisition by Vodafone may create value for shareholders, our investment thesis is not dependent on such an event.


    From Weitz Value Fund first quarter 2017 commentary.

      


  • Weitz Value Fund Comments on Liberty Broadband

    Liberty Broadband (NASDAQ:LBRDA)’s principal asset consists of its interest in Charter Communications. In late January, rumors broke that Verizon Communications had made an informal acquisition offer to Charter Communications, sending both Charter and Liberty Broadband shares higher. We acknowledge that such a combination makes strategic sense for Verizon as it searches for an efficient means to deploy 5G wireless technology (which will require very dense, wired networks). However, we suspect shareholders can reap greater value from Charter continuing to integrate its Time Warner Cable and Bright House Networks acquisitions on a stand- alone basis. That said, we believe management will pursue the right course (stand-alone or M&A) that will maximize long-term shareholder value.


    From Weitz Value Fund first quarter 2017 commentary.

      


  • Weitz Value Fund Comments on Allergan

    Allergan (NYSE:AGN) is a global specialty pharmaceutical company focusing on the development, manufacturing, marketing and distribution of brand name, biosimilar and over-the-counter pharmaceutical products. Allergan shares finished 2016 on a higher note, following an otherwise challenging year. While revenues and earnings were shy of expectations and drug price regulation dominated headlines throughout much of the past year, the health of Allergan’s core underlying growth drivers gave us confidence to continue buying shares at increasingly attractive discounts during the fourth calendar quarter. Encouragingly, recent operating results have come in ahead of internal forecasts, and the company’s initial outlook for 2017 exceeded our expectations. Growth across Allergan’s therapeutic segment looks healthy, with the global aesthetics franchise demonstrating notable strength. Headwinds from legislative and regulatory developments continue to bear monitoring,


    From Weitz Value Fund first quarter 2017 commentary.

      


  • Weitz Value Fund Comments on Endo International

    Endo International (NASDAQ:ENDP) is a specialty healthcare company engaged in developing, manufacturing, marketing and distributing branded pharmaceutical and generic products and medical devices. Endo experienced significantly worse-than-anticipated erosion at Qualitest, its legacy generic drug platform. The competitive environment changed quickly, and we were slow to recognize it. After conversations with both management and a couple of the larger drug buying consortiums, we could not gain comfort in the durability of Endo’s now lower earnings base. The company’s balance sheet and potential legal obligations (liabilities relating to the company’s legacy vaginal mesh products) left less room for error given growth challenges on the branded side of Endo’s business. Considering the erosion in our investment thesis, questions about management’s ability to identify and navigate risk, and a growing list of unknowns surrounding the business, we elected to close our position in the second calendar quarter of 2016 and refocus our capital in more attractive opportunities.


    From Weitz Value Fund first quarter 2017 commentary.

      


  • Weitz Value Fund Comments on QVC Group

    QVC Group (NASDAQ:QVCA) is a tracking stock issued by Liberty Interactive which includes subsidiaries QVC, zulily and its interest in HSN. QVC Group operates an American television network and also operates televised and online shopping experiences in other countries. In the third calendar quarter of 2016, shares of QVC Group fell after management indicated that its QVC U.S. business had experienced a significant sales headwind. QVC’s U.S. business, which had not seen a decline since the Great Recession, saw sales fall nearly 6% in the third quarter and 7% in the fourth quarter, as several categories simultaneously slowed. Importantly, we don’t view these issues as a sign of the QVC model suddenly being broken, and management has indicated sales results have begun to stabilize. QVC’s customer retention and loyalty remain strong, as does viewership of their network. Furthermore, the international businesses appear unaffected by the current U.S.-centric slowdown. Although the decline in QVC shares has been disappointing, management has taken advantage by accelerating their share repurchase to foster per share value growth.


    From Weitz Value Fund first quarter 2017 commentary.

      


  • Weitz Value Fund Comments on Berkshire Hathaway

    Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B)0 is a conglomerate holding company owning subsidiaries engaged in a number of business activities. Shares benefited from optimism that a combination of higher interest rates, lower taxes and increased domestic activity would increase earnings at Berkshire’s insurance and industrial businesses. We believe Berkshire will compound wealth for its shareholders for the foreseeable future.


    From Weitz Value Fund first quarter 2017 commentary.

      


  • Weitz Value Fund Comments on Liberty SiriusXM

    Liberty SiriusXM (NASDAQ:LSXMA) is a tracking stock, with its principal asset being Liberty Media’s 67% ownership of satellite radio operator SiriusXM. Thanks to the continued strength of new car sales in the U.S., SiriusXM has enjoyed very robust operating results in recent quarters, as 75% of all new cars sold feature a satellite radio built directly into the dashboard. New car buyers are offered a free trial of the service and typically convert to paying subscribers at a healthy rate. Recently, SiriusXM has opened a new channel for customer growth by partnering with used car dealers as well as service providers to offer trial subscriptions. Although we don’t anticipate these trials will convert at the same rate as those associated with new car sales, we believe it provides an excellent opportunity to remarket to existing car radios as well as lessen the company’s reliance on the cyclical new car market. Shares of Liberty SiriusXM mirrored most of SiriusXM stock price gain of the prior twelve months but still trades at a discount to our intrinsic value of standalone SiriusXM.


    From Weitz Value Fund first quarter 2017 commentary.

      


  • Weitz Value Fund First Quarter Commentary

    Investment Style: Large-Cap Value

      


  • Wally Weitz's Value Matters for 1st Quarter

    Dear Fellow Investor:


    News in the first quarter of 2017 was dominated by the initial activities of the new administration. Since the election in November, investors have been anticipating tax cuts, repatriation of stranded corporate profits, the announcement of massive infrastructure spending projects, and the dismantling of troublesome and expensive environmental and financial service regulations. The “Trump Bump” has propelled stocks higher, and our portfolios have participated.

      


  • Guru's Stocks With High Predictability

    According to GuruFocus’ All-in-One Screener, the following stocks have high business predictability ratings, and total returns since the beginning of the year are positive. At least five gurus are shareholders in the companies.


    ACI Worldwide Inc. (ACIW)

      


  • 8 Rising Stocks That Are Still Undervalued

    According to the GuruFocus All-in-One Screener, several gurus are focusing on stocks whose Peter Lynch fair values are far above the current price. The following stocks are trading with wide margins of safety and have positive performances over the past 12 months.


    GigaMedia Ltd. (GIGM) is trading around $3.08 per share. The Peter Lynch value gives the stock a fair price of $20.75 so the stock is undervalued with a margin of safety of 89%. Twelve weeks ago the stock started its positive upward trend; it now registers a positive performance of 21.79%.

      


  • Weitz Funds Comments on EOG Resources

    EOG Resources (NYSE:EOG) is an independent producer of crude oil and natural gas, with operations focused in the major producing basins in the U.S. (namely the Bakken, Eagle Ford and Permian). EOG boasts some of the highest quality hydrocarbon producing assets in North America as well as a culture firmly centered on return on invested capital.


    Its unique ability to continually reduce both costs and the capital employed in the production process places the company among the most efficient producers of oil and gas in the world. We purchased shares in EOG in the fall of 2015 amid significant downward pressure on oil prices. Management’s ability to unlock an inventory of over 4,000 high-return wells (assuming $40 oil prices) within its existing acreage through continued process improvements, in addition to its successful acquisition of Yates Petroleum, exceeded our expectations and rightly excited investors. With oil prices rebounding and EOG’s discount to value narrowing, we sold our shares during the fourth quarter at a nice gain. We would gladly own EOG again at the right price.

      


  • Weitz Funds Comments on Express Scripts

    Express Scripts (NASDAQ:ESRX) is the largest stand-alone pharmacy benefits manager (PBM) in the U.S., helping health benefit providers improve access to (and the affordability of) prescription drugs. The ongoing impasse with its largest customer (Anthem), an evolving competitive landscape, and public finger pointing between so-called middlemen and drug manufacturers as to the source of persistent drug inflation led us to (once again) test the assumptions underlying our notion of Express’s business value. Our additional diligence suggested an increased probability of Anthem not renewing with Express Scripts in 2019. In addition, the likelihood that competitive or industry pressures offset a portion (potentially even all) of other future profit-per-script drivers seem to have increased, particularly for Express. This combination made the risk-reward trade-off less compelling, and we elected to close our position in Express across the funds following the post-election rally in November.


    • From Weitz Investment Management's Value Fund 4th quarter 2016 commentary.
    •   


  • Weitz Funds Comments on CVS Health

    CVS Health (NYSE:CVS) operates a nationwide network of nearly 10,000 retail pharmacies, the nation’s second largest pharmacy benefits manager (PBM) in Caremark, and sizeable specialty and long-term care pharmacy platforms. This is the fund’s second go around with CVS, having last owned it back in 2013. CVS’ stock has been under pressure for most of the last 18 months after peaking during the summer of 2015. After nearly five years of consistent market share gains, the Caremark PBM suffered several client losses over the course of 2016. In addition, CVS also announced that its retail pharmacies would no longer be part of several important networks in 2017. These lost volumes will likely result in no earnings per share growth this year. These near-term negatives drove the stock down to a price that we found attractive. While management will need to navigate several risks over the course of the next couple of years, we believe CVS’ stock price provides an attractive valuation in the mid-$70s.


    • From Weitz Investment Management's Value Fund 4th quarter 2016 commentary.
    •   


  • Weitz Funds Comments on Amazon.com

    Amazon.com (NASDAQ:AMZN) is an e-commerce and cloud computing company. We believe that Amazon has built a global competitive advantage that will allow it to obtain a material share of the worldwide retail (not just e-commerce) market over a long period of organic growth. Amazon’s strong, customer-obsessed culture is unique among technology and retail firms, which has provided several new long-term investment opportunities. In addition to the retail business, the company’s Amazon Web Service (AWS) business has built significant share and scale within the infrastructure as a service market. AWS business is highly profitable and participates in a large and growing market.


    From Weitz Investment Management's Value Fund fourth quarter 2016 commentary.

      


  • Weitz Funds Comments on Thermo Fisher Scientific

    Thermo Fisher Scientific (NYSE:TMO) provides analytical instruments, equipment, reagents and consumables, as well as software and services for research, analysis, discovery and diagnostics across most of the globe. Thermo is well-diversified by both product and end market, boasting strong defensible market positions and reputable brands. Roughly three quarters of the company’s revenues are recurring in nature (consumables and services), consistent with our preference for subscription-like cash flow streams. Its portfolio of businesses is characterized by stable pricing, relatively acyclical organic growth and consistent excess cash generation. We believe the life sciences tools and diagnostics industry is a “good neighborhood,” characterized by relatively high entry barriers, high customer switching costs and rational competitive behavior. Currency headwinds and investor rotation toward more cyclically- exposed areas of the industrial and healthcare sectors left Thermo’s stock largely unchanged the past 18 months while our estimate of business value grew nicely. We took advantage, initiating a position at, what we believe is, an attractive valuation.


    • From Weitz Investment Management's Value Fund 4th quarter 2016 commentary.
    •   


  • Weitz Funds Comments on Visa

    Visa (NYSE:V) is the world’s largest electronic payment network. The company recently closed on its acquisition of Visa Europe, allowing it to provide a fully integrated network to clients, which should result in increased market share and lower costs. We believe Visa will compound nicely as worldwide payment volumes grow, developing countries switch from cash to cards and the company uses its technology and network to participate in all forms of electronic payments.


    From Weitz Investment Management's Value Fund fourth quarter 2016 commentary.

      


  • Weitz Funds Comments on McKesson

    McKesson (NYSE:MCK) distributes drugs, equipment and health and beauty care products throughout North America and portions of Europe. The company also delivers software solutions and outsourced services to hospitals, pharmacies and other healthcare organizations. Shares of McKesson declined in October as the company experienced unexpected competitive losses from its core independent pharmacy customer base. The source (price competition) and magnitude of these developments led to a downward revision in McKesson’s earnings power and undermined one of the pillars of our investment thesis – that drug wholesalers operate within a competitive, but otherwise rational, oligopoly. Our estimate of McKesson’s business value declined, and we elected to close our small position at a modest loss.


    From Weitz Investment Management's Value Fund fourth quarter 2016 commentary.

      


  • Weitz Funds Comments on Allergan

    Allergan (NYSE:AGN) is a global specialty pharmaceutical company focusing on the development, manufacturing, marketing and distribution of brand name, biosimilar and over-the-counter pharmaceutical products. Following a brief post-election rally, the majority of the biopharmaceutical sector retreated to prior price levels as capital continued to flow out of healthcare and into industries seen as potential beneficiaries of policy shifts under the new administration. After downwardly revising future growth expectations in August and again in early November, Allergan has become a “show me” story. Patent challenges for Restasis (dry eye treatment) and Namenda XR (alzheimer’s drug) may continue to weigh on the stock in the near term, though each contributes only a small percentage of our estimate of the company’s overall intrinsic value. Over the next 3-5 years, we believe the company will have healthy mid-single digit (or better) operating profit growth. 80% of the company’s recently announced $10 billion accelerated share repurchase program is complete at an average price below $200 per share. We believe this will prove to be a prudent use of excess cash in the long run. Future capital deployment and late-stage pipeline success remain potential positives over the next 12 -24 months. We continue to believe Allergan shares present compelling value at current prices.


    From Weitz Investment Management's Value Fund fourth quarter 2016 commentary.

      


  • Weitz Funds Comments on Twenty-First Century Fox

    Twenty-First Century Fox (NASDAQ:FOXA) is a diversified media and entertainment company. Sentiment has been generally positive as investors were reminded of the power of live, must-have content. The month of October featured two of the most widely watched presidential debates in history and five of seven World Series games that delivered the best ratings in over a decade. Investors have been further comforted by Fox’s presence in all of the major “skinny bundles” announcements and new online Pay-TV distribution packages. Finally, in December, Fox announced an offer to acquire the remaining shares of Sky plc. The announced offer for Europe’s premier satellite Pay-TV and content (sports and entertainment) company resolves a long-standing question of how to resolve Fox’s 39% minority stake in the entity. We continue to be encouraged by the prospect for continued improvement at Fox’s domestic channels and continued growth opportunities internationally.


    From Weitz Investment Management's Value Fund fourth quarter 2016 commentary.

      


  • Weitz Funds Comments on Wells Fargo

    Wells Fargo (NYSE:WFC) is a diversified financial services company. Shares rose materially during the quarter largely due to three tailwinds. First, the U.S. election results provided a boost to all bank stocks on expectations that industry regulatory burdens may ease. Second, higher interest rates and a steeper yield curve raised prospects for net interest margin (NIM) expansion. Third, the company took additional steps to address the “bogus account” scandal, including high-level management changes. The company’s very low-cost deposit base, ubiquitous distribution, ample capital and diverse business lines further our continued confidence. Wells Fargo’s stock trades at less than 14x expected earnings and a modest discount to our value estimate.


    From Weitz Investment Management's Value Fund fourth quarter 2016 commentary.

      


  • Weitz Funds Comments on Endo International

    Endo International (NASDAQ:ENDP) is a specialty healthcare company engaged in developing, manufacturing, marketing and distributing branded pharmaceutical and generic products and medical devices. Endo experienced significantly worse-than-anticipated erosion at Qualitest, its legacy generic drug platform. The competitive environment changed quickly, and we were slow to recognize it. After conversations with both management and a couple of the larger drug buying consortiums, we could not gain comfort in the durability of Endo’s now lower earnings base. The company’s balance sheet and potential legal obligations (liabilities relating to the company’s legacy vaginal mesh products) leave less room for error given growth challenges on the branded side of Endo’s business. Considering the erosion in our investment thesis, questions about management’s ability to identify and navigate risk, and a growing list of unknowns surrounding the business, we elected to close our position in the second calendar quarter and refocus our capital in more attractive opportunities.


    From Weitz Investment Management's Value Fund fourth quarter 2016 commentary.

      


  • Weitz Funds Comments on Liberty Global

    Liberty Global (NASDAQ:LBTYA) is the largest international cable company, with operations across Europe providing video, broadband Internet, fixed-line telephone and mobile services to its customers. Throughout 2016, Liberty Global suffered as the translational impact of a stronger U.S. dollar muted its reported financial results. Liberty’s revenues and expenses are generally denominated in the local currencies of its European operations, but its dollar denominated stock can create mismatches from time to time. Shares weakened, particularly in the wake of this summer’s “Brexit” vote, as the UK is the company’s largest market. Shares have recouped some of these losses as the market has further digested the Brexit event. Meanwhile, the results from the company’s new build program in the UK appear to be solid, and the pace of adding newly connected homes should accelerate into 2017. We remain confident in management’s plans to drive cost efficiencies and their new build investment strategy to provide future growth.


    From Weitz Investment Management's Value Fund fourth quarter 2016 commentary.

      


  • Weitz Funds Comments on Range Resources

    Range Resources (NYSE:RRC) is an independent producer of natural gas and natural gas liquids (NGLs) based in Fort Worth, Texas, with operations in the Marcellus shale and emerging Terryville field. Range’s stock cooled some during the second half of the year following a strong first half rebound from its January lows. A more normal start to winter and low overall drilling activity has led to much needed draws on natural gas storage, with present levels now below the 5 -year average for the first time in almost two years. Near-term gas prices have rebounded accordingly, but uncertainty around mid-cycle gas prices continues as oil drilling activity resumes (increasing competition from “associated” gas production) and Appalachian pipeline capacity increases significantly later this year. Range should be a direct beneficiary of the latter, supporting the company’s 20% production growth aspiration in 2018. While gas prices will likely always be volatile, we believe that at $2.75 or better, Range shares offer significant value.


    From Weitz Investment Management's Value Fund fourth quarter 2016 commentary.

      


  • Weitz Funds Comments on Berkshire Hathaway

    Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) is a conglomerate holding company owning subsidiaries engaged in a number of business activities. Shares benefited from optimism that a combination of higher interest rates, lower taxes and increased domestic activity would increase earnings at Berkshire’s insurance and industrial businesses.


    From Weitz Investment Management's Value Fund fourth quarter 2016 commentary.

      


  • Weitz Funds Comments on Liberty Broadband

    Liberty Broadband (NASDAQ:LBRDA) is a holding company for Liberty’s ownership stake of Charter Communications. Shares of Charter, and cable companies broadly, have performed well in the wake of the U.S. election. Although much remains to be seen, investors generally believe that regulatory pressures will ease as a result of a presumably more “industry friendly” Federal Communications Commission (FCC) as well as a Justice Department that may look more favorably on further industry consolidation. Investors are also hopeful that either the FCC or a Republican-controlled Congress will revisit actions of the previous FCC, including the more controversial actions taken as part of its “Net Neutrality” packages. We have invested in Liberty Broadband because we like the operating strategy at Charter, and while regulatory relief would certainly be a benefit, it’s not an explicit part of our investment thesis. Liberty Broadband shares trade at a discount to their underlying Charter investment due to the added complexity of Liberty’s involvement. We are confident Liberty’s management will ultimately collapse this discount, thereby making Liberty Broadband a cheaper opportunity to invest in Charter’s future.


    From Weitz Investment Management's Value Fund fourth quarter 2016 commentary.

      


  • Weitz Investment Management's Value Fund 4th Quarter Commentary

    Investment Style: Large-Cap Value


    The Value Fund’s Institutional Class returned +1.27% in the fourth calendar quarter, compared to +3.82% for the S&P 500 and +3.83% for the Russell 1000. For the calendar year, the Value Fund’s Institutional Class returned +3.13%, compared to +11.96% for the S&P 500 and +12.05% for the Russell 1000.

      


  • Wally Weitz's Value Matters for 4th Quarter

    Dear Fellow Investor:


    Last year saw plenty of action in the stock, bond and currency markets, but our guess is that 2016 will be remembered for its presidential election. It is hard to be politically neutral in discussing the election. As individuals and citizens, we have strong opinions about the new administration. We will spare you those thoughts, though, and focus on what we see as implications for investors.

      


  • Learning From the Biggest Mistakes of Institutional Investors

    Every investor makes mistakes. If someone tells you they do not, they are either lying or too inexperienced.


    Mistakes are a natural part of investing. Even Warren Buffett (Trades, Portfolio), who is widely considered the world’s most knowledgeable investor, has made some serious errors in his career. In fact, Buffett has said acquiring Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) was his biggest mistake, and look how that turned out.

      


  • Express Scripts to Include Harvoni in Hepatitis Cure Value Program

    As announced by Express Scripts (NASDAQ:ESRX) through PR Newswire Dec. 12, the program that targets the treatment of patients affected with the hepatitis C virus, called “Hepatitis Cure Value Program,” will be upgraded with another product in January.


    Gilead Sciences' (NASDAQ:GILD) Harvoni will be added to AbbVie's (NYSE:ABBV) Viekira Pak for the treatment of HCV patients.

      


  • Weitz Funds Analyst Corner: A Perspective on Murphy USA

    Murphy USA (NYSE:MUSA) is the largest stand-alone fuel retailer in the United States. The majority of its stores are located adjacent to a Wal-Mart, and they pursue a low-cost, high-volume model.

      


  • Weitz Funds Comments on Oracle

    Oracle (NYSE:ORCL) is the market share leader in sales of database software and is number two in enterprise software, globally. Oracle has moved aggressively to rewrite its enterprise applications, which were previously available for on premise installation, as Software as a Service (SaaS) products. The company has gained significant traction in moving customers to SaaS and we believe will gain share in the overall enterprise applications market. Oracle recently announced the availability of its Database as a Service offering, which it believes will enable customers to move their database workloads to the Oracle Cloud. We believe the company will grow as its new applications gain acceptance with its large base of customers.




  • Weitz Funds Comments on Twenty-First Century Fox

    Twenty-First Century Fox (NASDAQ:FOXA) is a diversified media and entertainment company. Shares of Fox declined in the wake of the company’s fiscal fourth quarter earnings report. The good news was continued strength in distribution revenues earned by its suite of Pay-TV networks around the world as well as a resilient ad market in the U.S. Unfortunately, Fox’s international ad revenues slowed considerably due to weakness in Northern Europe and India, rising only 1% in local currency after seven straight quarters of very strong, double- digit growth. Additionally, Fox’s three major summer film releases, X-Men: Apocalypse, Ice Age: Collision Course, andIndependence Day: Resurgence, all underperformed expectations. Moreover, management de-emphasized share repurchase within their capital allocation plans, preferring to preserve flexibility to either invest in the business organically (e.g., increasing investment in original content at the National Geographic channel) or to make acquisitions. Despite a more challenging international ad market and disappointing box office results, we continue to believe the underlying business is sound.




  • Weitz Funds Comments on Mastercard

    Mastercard (NYSE:MA) operates the world’s second-largest payment network and one of the best known global brands. During the quarter, shares rose as investors applauded continued payment volume growth and a slightly improved economic global outlook. Mastercard is among the most attractive businesses we own. Its network is well entrenched within the plumbing of payment systems across the globe. The transition from cash to digital forms of payment provide growth opportunities, while the core business produces healthy doses of excess cash flow with modest reinvestment requirements.




  • Weitz Funds Comments on Express Scripts

    Express Scripts (NASDAQ:ESRX) is the largest independent pharmacy benefits manager (PBM) in the United States, helping health benefit providers improve access to (and the affordability of) prescription drugs. As the U.S. election enters its final stages, pharmaceutical manufacturers have shouldered a significant portion of the public’s frustration with the growing lack of affordability in healthcare. In recent weeks, several drug companies have attempted to shift the conversation by pointing fingers at PBMs and other “middlemen” as contributing to (as opposed to minimizing) rising prescription drug costs. Express Scripts and its peers provide a necessary and valuable service to plan sponsors, constructing custom plan designs that balance customer desires for access, cost and flexibility. Providing the absolute lowest cost for each drug utilized is not often the sponsor’s only (or even primary) goal. Additionally, competitive intensity across the industry is high, with no less than two (and in most cases three) potential PBM models to choose from for managing drug costs. We believe Express Scripts keeps a reasonable amount of the savings it generates for clients (we estimate between 10-15%) and that demand for its services will remain high as cost challenges persist. Express Scripts’ shares currently trade at a meaningful discount to our estimate of intrinsic value.




  • Weitz Funds Comments on Allergan

    Allergan (NYSE:AGN) is a global specialty pharmaceutical company focusing on the development, manufacturing, marketing and distribution of brand name, biosimilar and over-the-counter (OTC) pharmaceutical products. One week after closing the sale of Actavis generics to Teva Pharmaceuticals, Allergan reported mildly disappointing top-line results for the quarter. Importantly, however, Allergan’s “core” products continue to grow nicely, with five of the company’s seven core therapeutic categories growing by double digits (in constant currency) versus the prior year. Our base case valuation of $350-360 per share does not depend on Allergan hitting CEO Brent Saunders’ goal of double- digit organic growth. However, strong, high single-digit organic sales growth appears achievable, as the company’s recently launched products continue to scale. One near-term positive of a lower share price is that Allergan’s $5 billion in share repurchases between now and year end will go further, and deployment of a portion of the company’s nearly $28 billion in cash remains a possible catalyst for the stock. The re-emergence of drug pricing as a political issue is not surprising to us as we enter the home stretch of the presidential election. We believe Secretary Clinton’s plan to control and eventually lower prescription drugs costs could negatively impact Allergan’s long-term earnings trajectory (perhaps by $2-3 per share on a base of $18), should she win the election, but with the stock at $240, we believe the risk of permanent loss is low. In short, Allergan’s risk/reward ratio (upside to base case vs. downside to low case) continues to be skewed in favor of the long-term owner.

      


  • Weitz Funds Comments on Texas Instruments

    Texas Instruments (NASDAQ:TXN) is one of the largest Analog and Embedded Semiconductor manufacturers globally. Texas Instruments designs, makes and sells semiconductors to electronics designers and manufacturers across the world. Analog and embedded content is found in just about every electronic device made, including automobiles. Texas Instruments has continued to benefit from investor recognition of the company’s execution, disciplined capital allocation (returning all excess cash to shareowners) and the potential that the market for analog semiconductors has become slightly less cyclical as the industry has matured and consolidated.

      


  • Weitz Funds Comments on Range Resources

    Range Resources (NYSE:RRC) is an independent producer of natural gas and natural gas liquids (NGLs) based in Fort Worth, Texas, with operations in the Marcellus shale and emerging Terryville field. Range’s stock cooled some during the third quarter following a strong rebound during the first half of the year. As expected, Range completed its purchase of Memorial Resource Development during mid-September, adding another sizeable low-cost, high-return natural gas asset in northern Louisiana to its prolific Marcellus acreage position. An improved balance sheet and the opportunity to produce significant quantities of natural gas near growing demand centers at rates of return similar to the Marcellus are clear positives from the Memorial transaction. Overall, we believe the backdrop for the most efficient natural gas producers remains favorable in the intermediate term; though weather continues to pose near-term risks, given elevated gas storage levels. We believe Range shares are worth between $48-50 share.

      


  • Weitz Funds Comments on Redwood Trust

    Redwood Trust (NYSE:RWT) invests in mortgage-related and other real estate-related assets, and is engaged in residential and commercial mortgage banking activities. Redwood recently took meaningful steps to right- size its cost and business structure in light of market conditions. After a successful repositioning of the company’s mortgage-banking business and associated expense infrastructure, Redwood’s leaner and more nimble platform is well positioned to execute longer-term strategic initiatives intended to enhance growth opportunities and future earnings power. We believe Redwood Trust remains competitively advantaged as a residential mortgage credit investor and is well positioned to benefit from potential government-sponsored enterprise (GSE) reform and the eventual revitalization of private-label residential securitization. Trading under book value and generating a dividend yield of nearly 8%, the stock continues to represent a compelling investment value.

      


  • Weitz Balanced Fund 3rd Quarter Commentary

    Investment Style: Moderate Allocation

      


  • Wally Weitz Comments on National CineMedia

    National CineMedia (NASDAQ:NCMI) operates digital, in-theatre media networks selling advertising and promotions. National CineMedia’s shares posted a modestly negative return during the quarter as investors adjusted to a slightly reduced outlook from the company’s management team. Although inventory sell-through and pricing remain strong, management indicated that current quarter results were being impacted by advertisers spending more with the Summer Olympics than previously anticipated. Shares were also likely pressured, to some degree, by a slightly disappointing summer box office, with a handful of key titles underperforming expectations. We continue to believe National CineMedia’s advertising network provides significant value and opportunity for marketers looking to reach large audiences, particularly with younger demographics.

      


  • Wally Weitz Comments on Fossil Group

    Fossil Group (NASDAQ:FOSL) is the fourth-largest producer of watches and the largest licenser of watches and jewelry globally. Following a strong first quarter earnings report, Fossil reported disappointing results in the second quarter due to a tough consumer environment and weakness in the wholesale channel in North America and Europe. The main drivers of the wholesale channel weakness were weak foot traffic, inventory destocking and continued moderation at their largest licensed brand, Michael Kors. This difficult environment led management to cut guidance for the full year. The retail channel and Fossil’s owned brands continued to outperform, with Skagen growing double- digits and the Fossil brand posting growth in a difficult environment. Despite low visibility through the end of the year, we expect a rebound in 2017 led by strategic investments and a large pipeline of product introductions, including wearables launches across 10 brands. Furthermore, investments in brand building and omni-channel initiatives should also benefit 2017 results.

      


  • Wally Weitz Comments on Range Resources

    Range Resources (NYSE:RRC) is an independent producer of natural gas and natural gas liquids (NGLs) based in Fort Worth, Texas, with operations in the Marcellus shale and emerging Terryville field. Range’s stock cooled some during the third quarter following a strong rebound during the first half of the year. As expected, Range completed its purchase of Memorial Resource Development during mid-September, adding another sizeable low-cost, high-return natural gas asset in northern Louisiana to its prolific Marcellus acreage position. An improved balance sheet and the opportunity to produce significant quantities of natural gas near growing demand centers at rates of return similar to the Marcellus are clear positives from the Memorial transaction. Overall, we believe the backdrop for the most efficient natural gas producers remains favorable in the intermediate term; though weather continues to pose near-term risks, given elevated gas storage levels. We believe Range shares are worth between $48-50 share.

      


  • Wally Weitz Comments on ADT Corp

    ADT Corp (NYSE:ADT) is a provider of monitored security, interactive home and business automation, and related monitoring services in the United States and Canada. After reaching a 2016 low of $24.94, ADT shares rose on February 15, 2016, in response to the announcement that private equity firm Apollo Global Management had agreed to acquire ADT for $42 per share, a slight discount to our mid-$40s estimate of business value. Apollo plans to combine ADT with its own alarm monitoring business, Protection One. We exited our roughly two year position at the end of February for a modest gain.

      


  • Wally Weitz's Hickory Fund 3rd Quarter Commentary

    Calendar Year-to-Date Contributors

      


  • Wally Weitz Comments on Wells Fargo

    Wells Fargo (NYSE:WFC) is a financial services company. The opening of bogus bank and credit card accounts at Wells Fargo was a serious violation of customer trust. Management’s pressure on employees to “make the numbers” and their apparent slow response to the problem once it surfaced are serious lapses of judgement and culture. Members of top management are paying a financial price, and some may lose their jobs. The bank may face additional penalties, and the reputational damage is significant. From an investment perspective, though, while the stock will probably be under a cloud for some period of time, we do not expect a permanent impairment of the company’s business value. The company’s very low- cost deposit base, ubiquitous distribution, ample capital and diverse business lines give us confidence in the durability of Wells Fargo’s franchise. The stock trades at less than 12x our earnings estimates, and we continue to own the company at quarter end.

    From Wallace Weitz (Trades, Portfolio)'s third quarter 2016 Partners III Opportunity Fund.   


  • Wally Weitz Comments on Berkshire Hathaway

    LiLAC Group (NASDAQ:LILA) is a tracking stock distributed by Liberty Global during the third calendar quarter of 2015 designed to provide an avenue to tap growth opporutnities available in Latin America and the Caribbean. In May of 2016, Liberty Global closed its acquisition of Cable & Wireless Communications and attributed the operations to LiLAC Group. The consideration paid included new shares of both the Latin American and European tracking stocks. To compensate the European tracker stockholders, Liberty Global received a 67% intergroup stake in LiLAC. In an effort to remove this complexity and restore the Latin America tracker to full public ownership, Liberty Global announced on June 2 the intergroup stake would be distributed directly to shareholders. Shares were subsequently pressured, as many shareholders either sold short the new LiLAC shares before they were received or sold outright after the distribution. As the selling pressure abated, shares fell again after LiLAC missed earnings expectations in the most recent quarter.


    LiLAC Group’s shares declined after LiLAC reported third quarter results that were below Wall Street’s expectations. This was the first quarter since LiLAC closed the acquisition of Cable & Wireless Communications. Outside investors largely overestimated the newly acquired asset’s near-term contributions to the combined entity due to different accounting treatments between the two companies and a lack of general information. Missing expectations has created near-term price pressure, but we anticipate that in the coming quarters LiLAC will demonstrate the benefits they saw in this acquisition, beginning with identifying operating synergies for investors.

      


  • Wally Weitz Comments on Berkshire Hathaway

    Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) is a conglomerate holding company owning subsidiaries engaged in a number of business activities. Berkshire shares were helped by the closing of the Precision Castparts acquisition in the first calendar quarter, improved operating performance at its Burlington Northern railroad subsidiary and the potential of further capital allocation opportunities. Additionally, Berkshire shares were helped by the diversification of its underlying businesses as well as the appreciation of the publically traded securities it holds. Furthermore, momentum resulting from management’s general optimism about the company’s long-term prospects continues to excite investors.

    From Wallace Weitz (Trades, Portfolio)'s third quarter 2016 Partners III Opportunity Fund.   


  • Wally Weitz's Partners III Opportunity Fund 3rd Quarter Commentary

    The Partners III Opportunity Fund’s Institutional Class returned +4.06% in the third calendar quarter, compared to +3.85% for the S&P 500 and +4.40% for the Russell 3000. For the calendar year to date, the Partners III Opportunity Fund’s Institutional Class returned +4.72%, compared to +7.84% for the S&P 500 and +8.18% for the Russell 3000.

      


  • Wally Weitz Comments on Avon Products

    Avon Products (NYSE:AVP) is a manufacturer and marketer of beauty and related products. Avon shares responded positively to developments during the quarter, including continued improvement in local currency sales and the identification of $70 million of cost savings in 2016. In addition, the outlook for the Brazilian economy, Avon’s single largest market, is slowly improving. Although the stock responded well this quarter to positive developments, the allocation is sized in accordance with the economic headwinds that still persist and the variance of possible outcomes among our estimates of intrinsic value.

    From Wallace Weitz (Trades, Portfolio)'s Partners Value Fund third-quarter commentary.   


  • Wally Weitz Comments on Liberty Global

    Liberty Global (NASDAQ:LBTYA) is the largest international cable company, with operations in 14 countries providing video, broadband Internet, fixed-line telephone and mobile services to its customers. As the worst of the Brexit fears began to abate (the United Kingdom represents roughly 38% of Liberty Global’s cash flow generation), shares of Liberty Global recovered some of their losses of the prior quarter. Shares also likely benefited from the EU’s approval of the previously announced formation of a 50/50 joint venture with Vodafone combining Liberty’s strong cable and broadband businesses with Vodafone’s mobile offering to create a more competitive “converged” bundle. We remain confident of continued growth for Liberty Global’s cable offerings and management’s ability to deliver operationally.

    From Wallace Weitz (Trades, Portfolio)'s Partners Value Fund third-quarter commentary.   


  • Wally Weitz Comments on Twenty-First Century Fox

    Twenty-First Century Fox (NASDAQ:FOXA) is a diversified media and entertainment company. Shares of Fox declined in the wake of the company’s fiscal fourth quarter earnings report. The good news was continued strength in distribution revenues earned by its suite of Pay-TV networks around the world as well as a resilient ad market in the U.S. Unfortunately, Fox’s international ad revenues slowed considerably due to weakness in Northern Europe and India, rising only 1% in local currency after seven straight quarters of very strong, double-digit growth. Additionally, Fox’s three major summer film releases, X-Men: Apocalypse, Ice Age: Collision Course, andIndependence Day: Resurgence, all underperformed expectations. Moreover, management de-emphasized share repurchase within their capital allocation plans, preferring to preserve flexibility to either invest in the business organically (e.g., increasing investment in original content at the National Geographic channel) or to make acquisitions. Despite a more challenging international ad market and disappointing box office results, we continue to believe the underlying business is sound.

    From Wallace Weitz (Trades, Portfolio)'s Partners Value Fund third-quarter commentary.   


  • Wally Weitz Comments on QVC Group

    QVC Group (NASDAQ:QVCA) is owned by Liberty Interactive. QVC is an American television network and multinational corporation specializing in televised and online shopping experiences. Shares of QVC Group fell after management indicated that its U.S. business had experienced significant sales headwinds, which are likely to continue into the next quarter. QVC’s U.S. business, which has not seen a sales decline since the Great Recession, appears to be tracking down in the mid to high single- digits, as its fashion business has slowed and a large beauty vendor is dealing with customer complaints on its hair care products. Importantly, we don’t view these issues as a sign of the QVC model suddenly being broken. QVC’s customer retention and loyalty remain strong, as does viewership of their network. Additionally, the international businesses appear unaffected by the current U.S.-centric slowdown. Although the decline in QVC shares is disappointing, we believe management will take advantage, growing their per share business value by continuing to execute their share repurchase strategy.

    From Wallace Weitz (Trades, Portfolio)'s Partners Value Fund third-quarter commentary.   


  • Wally Weitz Comments on Express Scripts

    QVC Group (NASDAQ:QVCA) is owned by Liberty Interactive. QVC is an American television network and multinational corporation specializing in televised and online shopping experiences. Shares of QVC Group fell after management indicated that its U.S. business had experienced significant sales headwinds, which are likely to continue into the next quarter. QVC’s U.S. business, which has not seen a sales decline since the Great Recession, appears to be tracking down in the mid to high single- digits, as its fashion business has slowed and a large beauty vendor is dealing with customer complaints on its hair care products. Importantly, we don’t view these issues as a sign of the QVC model suddenly being broken. QVC’s customer retention and loyalty remain strong, as does viewership of their network. Additionally, the international businesses appear unaffected by the current U.S.-centric slowdown. Although the decline in QVC shares is disappointing, we believe management will take advantage, growing their per share business value by continuing to execute their share repurchase strategy.

    From Wallace Weitz (Trades, Portfolio)'s Partners Value Fund third-quarter commentary.   


  • Wally Weitz Comments on Endo

    Endo (NASDAQ:ENDP) is a specialty healthcare company engaged in developing, manufacturing, marketing and distributing branded pharmaceutical and generic products and medical devices. Endo experienced significantly worse-than-anticipated erosion at Qualitest, its legacy generic drug platform. Simply put, our analysis of the company’s competitive positioning in controlled substance generics was wrong. The competitive environment changed quickly, and we were slow to recognize it. After conversations with both management and a couple of the larger drug buying consortiums, we could not gain comfort in the durability of Endo’s now lower earnings base. The company’s balance sheet and potential legal obligations (liabilities relating to the company’s legacy vaginal mesh products) leave less room for error given growth challenges on the branded side of Endo’s business. Considering the erosion in our investment thesis, questions about management’s ability to identify and navigate risk, and a growing list of unknowns surrounding the business, we elected to close our position in the second calendar quarter and refocus our capital in more attractive opportunities.

    From Wallace Weitz (Trades, Portfolio)'s Partners Value Fund third-quarter commentary.   


  • Wally Weitz Comments on Colfax

    Colfax (NYSE:CFX) is a leading manufacturer of pumps, gas handling products and welding equipment. Shares have risen through the year at the prospect of a bottoming in many of Colfax’s end markets, which include oil & gas, power generation and mining. This potential bottoming provides confidence that sales growth may return in the near future. In addition, the use of the Colfax Business System, a management philosophy and a set of tools based on the concept of continuous improvement to drive new product development and cut costs, has improved the margin outlook for the business.

    From Wallace Weitz (Trades, Portfolio)'s Partners Value Fund third-quarter commentary.   


  • Wally Weitz Comments on Liberty Broadband

    Liberty Broadband (NASDAQ:LBRDA) holds a 20% ownership interest (25% aggregate voting power) in Charter Communications. Charter Communications reported quarterly results for the first time since closing on its mergers with Time Warner Cable and Bright House Networks. As such, investors had their first look at the combined entity, even if Charter had only operated these assets for 43 days. Results from the legacy Charter footprint remained strong, and management provided a helpful overview of the combined company as well as their integration and synergy plans. We, and other investors, are excited by the opportunity to run the “Charter playbook” with the newly combined company. Charter shares were also aided by the company’s September inclusion into the S&P 500 Index.

    From Wallace Weitz (Trades, Portfolio)'s Partners Value Fund third-quarter commentary.   


  • Wally Weitz's Partners Value Fund 3rd Quarter Commentary

    The Partners Value Fund’s Institutional Class returned +3.82% in the third calendar quarter, compared to +3.85% for the S&P 500 and +4.40% for the Russell 3000. For the calendar year to date, the Partners Value Fund’s Institutional Class returned +4.62%, compared to +7.84% for the S&P 500 and +8.18% for the Russell 3000.


    Calendar Year-to-Date Contributors

      


  • Weitz Funds 3rd Quarter Value Matters

    Dear Fellow Investor:


    The third quarter of 2016 was a good one for our stock funds. In a relatively lackluster year for the stock market, each showed gains for the quarter and all are up year to date. All but one of our bond funds also showed gains in the quarter and all have earned strong returns during the first nine months of the year. The table on our website shows for all of our funds over various time frames. As usual, we suggest that the longer measuring periods are more meaningful.

      


  • Wallace Weitz's Largest 2nd-Quarter Trades

    Wallace Weitz (Trades, Portfolio) manages a portfolio composed of 68 stocks with a total value of $2.663 billion. During the second quarter the guru’s largest trades were:


    The investor bought 4,268,970 shares in Liberty SiriusXM Group Class C (LSXMK) with an impact of 4.95% on the portfolio.

      


  • 15 Questions With Wally Weitz

    1. How and why did you get started investing? What is your background?


    As a kid (12) I tagged along to a lunch with a stockbroker. Something about his pitch intrigued me and I bought “How to Buy Stocks” by Louis Engel on the way home. I bought my first stock a few weeks later and was hooked. I went through a charting phase in high school and then discovered Ben Graham while at Carleton College. My only formal training was my economics degree from Carleton.

      


  • Tom Gayner Buys Microsoft, Amazon

    Tom Gayner (Trades, Portfolio), executive vice president and chief investment officer of Markel Corp. (NYSE:MKL) and president of Markel Gayner Asset Management Inc., Markel's investment subsidiary since December 1990, bought shares in the following stocks in the second quarter.


    The investor acquired 522,000 shares in Liberty Media Corp. (LSXMK) with an impact of 0.42% on the portfolio.

      


  • Wally Weitz Comments on Laboratory Corp of America

    Laboratory Corp. of America (NYSE:LH) is a healthcare diagnostics company providing comprehensive clinical laboratory services to medical professionals and end-to-end drug development support to pharmaceutical manufacturers. LabCorp reported stronger than expected organic growth during the first quarter in both its diagnostics and drug development segments and raised its financial forecast for the full year. Covance, its drug development segment, has demonstrated improving operating momentum the past three quarters, with strength across each of its primary end markets (pre-clinical, central lab, late stage). Finally, the Center for Medicare and Medicaid Services’ (CMS’) highly anticipated Final Rule on changes to the Medicare Clinical Lab Fee Schedule in mid-June included two positives for the lab industry – a delay in implementation until 2018 and the inclusion of higher cost outpatient hospital labs, which is a piece that will determine future reimbursement levels. While final details won’t be known for some time, we anticipate these reimbursement changes will have a very modest impact on LabCorp’s future earnings power.


    From Weitz Partners Fund's second quarter 2016 commentary.

      


  • Wally Weitz Comments on Fossil Group

    Fossil Group (NASDAQ:FOSL) is the fourth-largest producer of watches and the largest licenser of watches and jewelry globally. Following a strong first quarter earnings report, Fossil reported disappointing results in the second quarter due to a tough consumer environment and weakness in the wholesale channel in North America and Europe. The main drivers of the wholesale channel weakness were weak foot traffic, inventory destocking and continued moderation at their largest licensed brand, Michael Kors. This difficult environment led management to cut guidance for thefull year. The retail channel and Fossil’s owned brands continued to outperform, with Skagen growing double-digits and the Fossil brand posting growth in a difficult environment. Despite low visibility over the next several quarters, we expect a rebound in 2017 led by a large pipeline of product introductions, including wearables launches across 10 brands. Furthermore, investments in brand building and omni-channel initiatives should also benefit 2017 results.


    From Weitz Partners Fund's second quarter 2016 commentary.

      


  • Weitz Funds Comments on Omnicon Group

    Omnicon Group (NYSE:OMC) - Omnicom is the second-largest advertising agency holding company in the world, providing marketing, advertising and communication services to clients across the globe. The Fund first purchased shares in Omnicom roughly six years ago, attracted by the industry’s oligopolistic structure; the importance (some would say necessity) of the services its agencies provide to corporate advertisers; the capital efficient nature of its business; and an undemanding price, as investors fretted over advertising budgets that were slow to rebound on the heels of the Great Recession. Omnicom compounded nicely during our period of ownership, generating an annualized total return of approximately 21%. We closed our position in April, with the stock reaching our estimate of business value.


    From Weitz Value Fund's Value second quarter 2016 commentary.

      


  • Weitz Funds Comments on TransDigm Group

    TransDigm Group (NYSE:TDG) is a designer, producer and supplier of engineered aircraft components for use on commercial and military aircraft. TransDigm’s shares moved higher during the second calendar quarter on better than expected results in the company’s commercial aftermarket business, the acquisition of Data Device Corporation and the raising of additional debt capital, which may signal the possibility of future mergers & acquisitions or a special dividend. Moreover, TransDigm’s investor meeting in late-June provided additional information regarding the strength and durability of the company’s business model and strategy for the foreseeable future.


    From Weitz Value Fund's Value second quarter 2016 commentary.

      


  • Weitz Funds Comments on Monsanto

    Monsanto (NYSE:MON) is a provider of seeds and biotech traits for corn, soybeans and cotton. Bayer, a German Life Sciences company, proposed acquiring Monsanto in the second quarter in what is a rapidly consolidating agricultural seeds and chemicals sector. Monsanto ultimately rejected Bayer’s initial offer of $122 per share as financially inadequate, but discussions remain ongoing. We have long viewed Monsanto as the highest quality franchise in agriculture, a view validated by Bayer’s acquisition proposal. The company’s earnings power is currently facing a number of headwinds, including currency effects, low commodity prices, regulatory delays and longer product introduction cycles. Nevertheless, we view its technology and research & development pipeline as second-to-none, which should allow it to create double-digit earnings growth from 2017 through 2019.


    From Weitz Value Fund's Value second quarter 2016 commentary.

      


  • Weitz Funds Comments on Allergan

    Allergan (NYSE:AGN) is a global specialty pharmaceutical company focusing on the development, manufacturing, marketing and distribution of generic, brand name, biosimilar and over-the-counter (OTC) pharmaceutical products. The dissolution of Allergan’s merger with Pfizer in April, delays in gaining Federal Trade Commission approval for the sale of its global generics business to TEVA and broader industry concern around prescription drug prices combined to push Allergan’s stock down by 26% during the first half of the calendar year. As we wrote in January, we like the stand-alone Allergan business without the generics business and believe the $ 40 billion sale to TEVA should soon close. There are a number of signs that growth in Allergan’s aesthetics franchise is accelerating, and the company’s key product launches – VIBERZI, VRAYLAR and KYBELLA – appear to be off to healthy starts. The combination of healthy organic growth, debt reduction and meaningful share repurchases should drive per share value creation over our investment horizon. We substantially increased the Fund’s Allergan position during the second quarter at attractive discounts to our business value estimate.


    From Weitz Value Fund's Value second quarter 2016 commentary.

      


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