Wally Weitz letter to shareholders on market condition: "We’ve chosen to stay about 90% invested in most of the funds (about 70% in P-III) because we don’t believe we can get out, sidestep a temporary decline, and get back in effectively."
This makes for scary and distressing days, but shouldn’t do permanent damage. Most of our companies are generating excess free cash flow (even if their earnings per share are lower than last year) and they can use that extra cash to buy other companies cheaply, buy their own stock, or build reserves for future use. When panic sets in, logic goes out the window and prices can fall to ridiculously cheap levels, as in 1974, but they don’t STAY there.
The shape of the financial markets has changed and some companies will probably never be as successful as they once were, but the economy should be fine and other companies will be more successful than before. It’s important that our companies survive this turmoil and we are confident that they will. It is also important that we adjust our holdings to take advantage of this ‘changing of the guard’ and we think we’re doing that. How successfully we have done these things won’t be clear for a while, but we believe strongly that owning pieces of good businesses at prices well below the intrinsic value of those businesses is a prescription for long-term investment success. In the meantime, we’ll have our patience tested. Our client service representatives can’t make predictions or promises (and they shouldn’t be blamed for what happens to stock prices), but if you have questions about specific companies or our investment strategy, they can pass them on to the portfolio managers and we will be glad to answer any questions we can.
Read the complete letter
This makes for scary and distressing days, but shouldn’t do permanent damage. Most of our companies are generating excess free cash flow (even if their earnings per share are lower than last year) and they can use that extra cash to buy other companies cheaply, buy their own stock, or build reserves for future use. When panic sets in, logic goes out the window and prices can fall to ridiculously cheap levels, as in 1974, but they don’t STAY there.
The shape of the financial markets has changed and some companies will probably never be as successful as they once were, but the economy should be fine and other companies will be more successful than before. It’s important that our companies survive this turmoil and we are confident that they will. It is also important that we adjust our holdings to take advantage of this ‘changing of the guard’ and we think we’re doing that. How successfully we have done these things won’t be clear for a while, but we believe strongly that owning pieces of good businesses at prices well below the intrinsic value of those businesses is a prescription for long-term investment success. In the meantime, we’ll have our patience tested. Our client service representatives can’t make predictions or promises (and they shouldn’t be blamed for what happens to stock prices), but if you have questions about specific companies or our investment strategy, they can pass them on to the portfolio managers and we will be glad to answer any questions we can.
Read the complete letter
