1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Sydnee Gatewood
Sydnee Gatewood
Articles (2434) 

Wallace Weitz Adds 6 Stocks to Portfolio in 1st Quarter

Guru also invests in an ETF

Weitz Investment Management’s Wallace Weitz (Trades, Portfolio) disclosed seven new holdings in his portfolio for the first quarter of the year, which was released earlier this week.

When picking stocks, the guru’s Omaha, Nebraska-based firm combines Benjamin Graham’s principles of price sensitivity and insistence on margin of safety with a conviction that qualitative factors that allow the company to control its future can be more important than statistical metrics like book value and earnings.

With these criteria in mind, Weitz took positions in CoStar Group Inc. (NASDAQ:CSGP), S&P Global Inc. (NYSE:SPGI), Heico Corp. (NYSE:HEI.A), IDEX Corp. (NYSE:IEX), Fortive Corp. (NYSE:FTV) and Honeywell International Inc. (NYSE:HON) during the quarter. He also established a 1.2 million-share stake in the SPRD Select Sector Fund-Financial (XLF) exchange-traded fund, expanding the equity portfolio by 1.33%.

CoStar Group

The guru invested in 64,900 shares of CoStar Group, allocating 2.04% of the equity portfolio to the position. The stock traded for an average price of $652.12 per share during the quarter.

The Washington D.C.-based company, which provides information, analytics and marketing services to the commercial real estate market, has a $24.46 billion market cap; its shares were trading around $657.36 on Tuesday with a price-earnings ratio of 80.73, a price-book ratio of 7.07 and a price-sales ratio of 16.7.

The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced. The GuruFocus valuation rank of 1 out of 10 also supports this assessment.

e228bb0a3d006f369c4ddb819c348e87.png

In an analyst corner published by the hedge fund, Jonathan Baker wrote that the company has “built a wide moat that we believe is unlikely to be crossed by any competitor. CoStar Group scores high in our quality assessment and has a clean balance sheet. We have been able to buy the company at what we believe is a significant discount to intrinsic value, making it a prime example of our Quality-at-a-Discount (QuaD) investing approach.”

GuruFocus rated CoStar’s financial strength 7 out of 10, driven by a comfortable level of interest coverage and a robust Altman Z-Score of 13.21.

The company’s profitability scored an 8 out of 10 rating on the back of an expanding operating margin, strong returns that outperform at least half of its competitors and a moderate Piotroski F-Score of 6, which indicates conditions are stable. CoStar also has a business predictability rank of two out of five stars due to consistent earnings and revenue growth. According to GuruFocus, companies with this rank typically return an average of 6% per annum over a 10-year period.

Of the gurus invested in CoStar, Ron Baron (Trades, Portfolio) has the largest stake with 6.2% of outstanding shares. Other top guru shareholders are Frank Sands (Trades, Portfolio), Chuck Akre (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).

S&P Global

Weitz picked up 68,500 shares of S&P Global, dedicating 0.90% of the equity portfolio to the holding. During the quarter, shares traded for an average price of $275.14 each.

The financial information and analytics company, which is headquartered in New York City, has a market cap of $72.43 billion; its shares were trading around $302.94 on Tuesday with a price-earnings ratio of 31.88 and a price-sales ratio of 10.82.

According to the Peter Lynch chart, the stock is overvalued. The GuruFocus valuation rank of 1 out of 10 also leans toward overvaluation as the share price and price-sales ratio are near 10-year highs.

b198ba65445aecc0d55179e4e2b95196.png

S&P Global’s financial strength was rated 5 out of 10 by GuruFocus. In addition to adequate interest coverage, the company is supported by a high Altman Z-Score of 7.56. It may be becoming less efficient, however, as its assets are building up at a faster rate than revenue is growing.

The company’s profitability fared much better, scoring a 9 out of 10 rating on the back of operating margin expansion, strong returns that outperform a majority of industry peers and a high Piotroski F-Score of 8, which indicates business conditions are healthy. S&P also has a one-star business predictability rank. GuruFocus says companies this rank typically return an average of 1.1% per year.

With a 0.54% stake, Spiros Segalas (Trades, Portfolio) is the company’s largest guru shareholder. Bill Nygren (Trades, Portfolio), Daniel Loeb (Trades, Portfolio), Pioneer, David Carlson (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Cohen, David Rolfe (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Greenblatt, Baron and many other gurus also have a position in the stock.

Heico

The investor entered a 158,750-share holding of Heico, giving it 0.54% space in the equity portfolio. The stock traded for an average per-share price of $89.69 during the quarter.

The Florida-based aerospace and electronics company has a $10.78 billion market cap; its shares were trading around $72.89 on Tuesday with a price-earnings ratio of 26.99, a price-book ratio of 5.63 and a price-sales ratio of 4.78.

Based on the Peter Lynch chart, the stock appears to be overvalued. The GuruFocus valuation rank of 1 out of 10 also supports this assessment.

89058100a590552bb1f7ce11461a61e3.png

In his first-quarter letter to investors, Weitz wrote that although the airlines are currently restricted due to the coronavirus outbreak, “it is unlikely that air travel is permanently impaired.” As a result, Heico will benefit as planes return to service. In addition, the company’s “conservative balance should allow them to not only survive this temporary halt but to continue their strategy of bolt-on acquisitions at attractive prices to accelerate business value growth.”

GuruFocus rated Heico’s financial strength 6 out of 10. Although the company has issued approximately $142.12 million in new long-term debt over the past three years, it is still manageable due to a comfortable level of interest coverage. It also has a sturdy Altman Z-Score of 7.1, which indicates it is in good standing financially even though its assets are building up at a faster rate than revenue is growing.

The company’s profitability scored a perfect 10 out of 10 rating, driven by an expanding operating margin, strong returns that outperform a majority of competitors and a high Piotroski F-Score of 7. Due to recording steady earnings and revenue growth, Heico also has a perfect five-star business predictability rank. GuruFocus data shows companies with this rank typically return an average of 12.1% per year.

Simons’ firm is the company’s largest guru shareholder with a 1.21% stake. Other top guru investors include Gayner, Baron, Chuck Royce (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Pioneer, Jones and Mario Gabelli (Trades, Portfolio).

IDEX

Weitz purchased 63,394 shares of IDEX, impacting the equity portfolio by 0.47%. During the quarter, shares traded for an average price of $157.69 each.

Headquartered in Lake Forest, Illinois, the company, which manufactures pumps, flow meters, valves and fluidic systems for customers in a variety of end markets, has a market cap of $11.58 billion; its shares were trading around $152.92 on Tuesday with a price-earnings ratio of 28.23, a price-book ratio of 5.27 and a price-sales ratio of 4.76.

The Peter Lynch chart and the GuruFocus valuation rank of 1 out of 10 both suggest the stock is overvalued.

8eb264ce49c10849cee584cf04c4e8a3.png

Boosted by adequate interest coverage and a high Altman Z-Score of 6.4, IDEX’s financial strength was rated 6 out of 10 by GuruFocus. The company may be becoming less efficient, however, since its assets are building up at a faster rate than its revenue is growing.

The company’s profitability scored a 9 out of 10 rating on the back of operating margin expansion, strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 5. IDEX’s 3.5-star business predictability rank is on watch as a result of a slowdown in revenue per share growth over the past 12 months. According to GuruFocus, companies with this rank typically return an average of 9.3% per year.

Of the gurus invested in IDEX, PRIMECAP Management (Trades, Portfolio) has the largest position with 0.76% of outstanding shares. Baron, Gabelli, Simons’ firm, Pioneer, Cohen, Greenblatt, Lee Ainslie (Trades, Portfolio) and Ray Dalio (Trades, Portfolio) are also shareholders.

Fortive

The guru bought a 25,000-share holding of Fortive, giving it 0.07% space in the equity portfolio. The stock traded for an average price of $69.69 per share during the quarter.

The Everett, Washington-based industrial conglomerate has a $20.04 billion market cap; its shares were trading around $59.20 on Tuesday with a price-earnings ratio of 36.95, a price-book ratio of 2.79 and a price-sales ratio of 2.72.

According to the Peter Lynch chart, the stock is overvalued.

63c6bf0381486d8ea39cb7cef5b1c52f.png

GuruFocus rated Fortive’s financial strength 4 out of 10. Despite issuing approximately $3.1 billion in new long-term debt over the past three years, the company has sufficient interest coverage. The Altman Z-Score of 2.28 suggests it is under some financial pressure, however, as its assets are building up at a faster rate than revenue is growing. Similarly, the company may not be capital efficient since its return on invested capital is below the weighted average cost of capital.

The company’s profitability fared much better with a 7 out of 10 rating. Although the operating margin is in decline, Fortive is supported by returns that outperform a majority of competitors and a moderate Piotroski F-Score of 4.

With a 2.13% stake, Andreas Halvorsen (Trades, Portfolio) is the company’s largest guru shareholder. Other top investors are Louis Moore Bacon (Trades, Portfolio), Cohen, Pioneer, Simons’ firm, Dalio, Greenblatt and Jones.

Honeywell International

The investor started a 10,000-share position in Honeywell International. The trade had an impact of 0.07% on the equity portfolio. The stock traded for an average per-share price of $164.66 during the quarter.

The industrial conglomerate, which is headquartered in Charlotte, North Carolina, has a market cap of $94.04 billion; its shares were trading around $132.64 on Tuesday with a price-earnings ratio of 15.4, a price-book ratio of 5.45 and a price-sales ratio of 2.68.

Based on the Peter Lynch chart, the stock appears to be trading near its fair value. The GuruFocus valuation rank of 1 out of 10, however, leans more toward overvaluation.

b7830e264874e121cf404b69bbee95ba.png

Honeywell’s financial strength was rated 6 out of 10 by GuruFocus on the back of comfortable interest coverage and a high Altman Z-Score of 3.57.

The company’s profitability scored an 8 out of 10 rating, driven by an expanding operating margin, strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 6. Although Honeywell has recorded a decline in revenue per share over the past year, it still has a three-star business predictability rank. According to GuruFocus, companies with this rank return 8.2% per year on average.

PRIMECAP is the company’s largest guru shareholder with 0.26% of outstanding shares. Other top guru investors include Pioneer, Mairs and Power (Trades, Portfolio), Gabelli, Diamond Hill Capital (Trades, Portfolio), Grantham, Simons’ firm, Carlson, Greenblatt, Ken Fisher (Trades, Portfolio) and Jones.

Additional trades and portfolio performance

Along with the new investment in the ETF, Weitz also added to several positions during the quarter, including Vulcan Materials Co. (NYSE:VMC), JPMorgan Chase & Co. (NYSE:JPM) and Markel Corp. (NYSE:MKL).

Over half of the guru’s $1.87 billion equity portfolio, which is composed of 67 stocks, is invested in the financial services and communication services sectors.

2a0d62f1b53af640e0cd7e1459161333.png

GuruFocus noted the Weitz Partners Fund returned 33.26% in 2019, outperforming the S&P 500’s 31.48% return.

Disclosure: No positions.

Read more here:

Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.

About the author:

Sydnee Gatewood
I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:



Performances of the stocks mentioned by Sydnee Gatewood


User Generated Screeners


pjmason14Momentum
pascal.van.garsseHigh FCF-M2
kosalmmuse6
kosalmmuseBest one1
DBrizanall 2019Feb26
kosalmmuseBest one
DBrizanall 2019Feb25
kosalmmuseNice
kosalmmusehan
MsDale*52-Week Low
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)