Weitz Investment Management leader Wallace Weitz (Trades, Portfolio) revealed last week he trimmed his long-held Intelligent Systems Corp. (INS, Financial) stake by 13.12%.
When picking stocks, the investor’s Omaha, Nebraska-based firm combines Benjamin Graham’s price sensitivity and insistence on margin of safety with a conviction that qualitative factors that allow the company to control its destiny can be more important than statistical values like book value and earnings.
According to GuruFocus Real-Time Picks, a Premium feature, the guru sold 284,095 shares of the Norcross, Georgia-based software company on Dec. 31, impacting the equity portfolio by -0.47%. The stock traded for an average price of $39.94 per share. It now represents 3.11% of Weitz’s equity portfolio.
GuruFocus estimates he has gained 3,475.81% on the investment since establishing it in the third quarter of 2009.
The software company, which provides technology solutions and processing services to financial technology and services markets, has a $347.47 million market cap; its shares were trading around $37.76 on Monday with a price-earnings ratio of 36.49, a price-book ratio of 10.39 and a price-sales ratio of 11.69.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
On Nov. 1, 2019, the company reported third-quarter results. It posted earnings of 34 cents per share on $9.5 million in revenue, which grew 76% from the prior-year quarter.
Boosted by healthy debt ratios and comfortable interest coverage, GuruFocus rated Intelligent Systems’ financial strength 8 out of 10. The robust Altman Z-Score of 37.26 also indicates the company is in good standing financially.
The company’s profitability did not fare as well, scoring a 5 out of 10 rating despite having strong margins and returns that outperform a majority of competitors. It also has a moderate Piotroski F-Score of 5, which implies operations are stable, and a business predictability rank of one out of five stars. GuruFocus says companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.
Weitz is Intelligent Systems’ largest guru shareholder with 21.13% of outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Chuck Royce (Trades, Portfolio) also have positions in the stock.
Portfolio composition and performance
Roughly half of Weitz’s $2.43 billion equity portfolio, which is made up of 69 stocks as of the end of the third quarter, is invested in the financial services and communication services sectors.
Technology stocks, which include Intelligent Systems, make up 17.22% of the portfolio. Other software companies he holds include Salesforce.com Inc. (CRM, Financial), ACI Worldwide Inc. (ACIW, Financial), Guidewire Software Inc. (GWRE, Financial), Oracle Corp. (ORCL, Financial), Box Inc. (BOX, Financial), Perspecta Inc. (PRSP, Financial), Microsoft Corp. (MSFT, Financial), Accenture PLC (ACN, Financial) and Black Knight Inc. (BKI, Financial).
According to the firm’s website, the Weitz Partners III Opportunity Fund posted a return of 33.48% in 2019, slightly outperforming the S&P 500’s 31.49% return.
Disclosure: No positions.
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