Wally Weitz, the other guy in Omaha, had a good year in 2006. Each of the four stock funds earned total returns of over 20%, comfortably in excess of returns on the S&P 500. "The clearest lesson in changing changelessness was that while cheap stocks eventually go up, you cannot predict when it will happen. The stocks that generated great returns in 2006 were practically the same group that had languished in 2005. In our December 2005 letter, we discussed five companies whose business values had grown but whose stocks had weighed particularly heavily on 2005 results."
The outlook: "So, what next? There have only been a few times when stocks were so cheap that good returns seemed assured—and those times were so scary that it was not clear that stocks would not fall a lot more before finally doing well. Stocks in general don’t seem particularly cheap today—most of our stocks aren’t terribly cheap—but I feel very good about our chances of earning reasonable returns over the next several years."
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The outlook: "So, what next? There have only been a few times when stocks were so cheap that good returns seemed assured—and those times were so scary that it was not clear that stocks would not fall a lot more before finally doing well. Stocks in general don’t seem particularly cheap today—most of our stocks aren’t terribly cheap—but I feel very good about our chances of earning reasonable returns over the next several years."
Read the complete letter
