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Holly LaFon
Articles (8573)  | Author's Website |

Wally Weitz Buys 4 New Stocks, Axes Amazon

Weitz discloses moves early in 1st quarter letter

Widely followed investor Wally Weitz purchased shares of CarMax (NYSE:KMX), Tupperware Brands (NYSE:TUP), Oracle (NYSE:ORCL) and Markel (NYSE:MKL), he disclosed in a first-quarter shareholder letter Tuesday.

Weitz, co-chief investment officer and portfolio manager of the value-oriented Weitz Investment Management, said he bought the stocks by capitalizing on “current turmoil.”

“After three straight quarters of not just strong, but accelerating, positive returns, the market’s steady ascent has been interrupted by a bout of turbulence,” the letter read. “Periods of volatile stock prices are not unusual, though investors’ experience in 2017 lulled many into a false sense of security. Indeed, one such catalyst for the current turmoil was the meltdown of ETFs that allowed investors to bet on continued market calm by shorting the VIX Index (a commonly used benchmark for expected market volatility.)”

The Partners III Opportunities Fund’s Institutional Class, which Weitz manages, gained 1.8% in the first quarter, while the S&P 500 declined 0.76%. Volatility may help reverse recent short-term underperformance by the fund caused by conservative positioning and short bets against benchmark indexes including the S&P 500 and Nasdaq 100. Weitz has also stuck primarily to financial services and consumer communications services companies during the latter stages of the bull market, avoiding for the most part dearly priced FAANG stocks.

Despite a sidelined period, Weitz has still handily beat the index in his Partners III Opportunity Fund over the long term, with a 12.22% annualized return since inception in 1983, versus a 10.99% rise in the S&P 500.

Weitz’s search for stocks centers on management and cash flows. He typically focuses on companies that generate more cash than they need to operate and have leadership he deems honest and in partnership with shareholders.

His largest positions as of year-end reflected the conservative bent. Weitz’s No. 1 was Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway (NYSE:BRK.A), followed by Liberty Broadband (LBRDK), a communications company with a price-earnings ratio of 7.3. Another, Allergan (NYSE:AGN), he added to when it plunged so low as to become his worst performer of 2017.

Weitz caused some surprise, then, when in the fourth quarter he purchased Amazon (NASDAQ:AMZN), the online retail behemoth whose shares soared 431% over the past five years, citing its “unique technical capabilities, global scale and culture of customer obsession” that he believed would drive long-term growth in business value.

But by the end of the first quarter, he had already sold the stake, he said in Tuesday’s letter.

“Subsequent to our sale, Amazon has landed in some political hot water, though we expect CEO Jeff Bezos and company to deftly navigate any potential regulatory changes,” the letter read. “At the right price, we’d gladly add Amazon back to our portfolio.”

Overview of new buys

CarMax

“CarMax (NYSE:KMX) is a national retailer of used cars, with a strong track record in both its sales and auto financing business,” Weitz said in his letter.

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Carmax Inc. has a market cap of $11.02 billion; its shares were traded around $61.32 Tuesday with a P/E ratio of 17.08 and P/S ratio of 0.67. Carmax Inc. had an annual average earnings growth of 20.10% over the past 10 years. GuruFocus rated Carmax Inc. the business predictability rank of 3-star.

Tupperware Brands

“Tupperware Brands (NYSE:TUP) is a global direct seller of kitchen and housewares business trading with an attractive free cash flow yield,” Weitz said.

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Tupperware Brands Corp. has a market cap of $2.17 billion; its shares were traded around $42.40 Tuesday with and P/S ratio of 0.98. The trailing 12-month dividend yield of Tupperware Brands Corp. stocks is 6.40%. The forward dividend yield of Tupperware Brands Corp. stocks is 6.43%. Tupperware Brands Corp. had an annual average earnings growth of 5.10% over the past 10 years.

Markel

“Markel is a widely respected specialty insurance carrier paired with a differentiated investment operation led by fellow value investor Tom Gayner (Trades, Portfolio),” Weitz wrote.

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Markel Corp. has a market cap of $16.06 billion; its shares were traded around $1155.39 Tuesday with a P/E ratio of 44.93 and P/S ratio of 2.67.

Oracle

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Oracle Corp. has a market cap of $185.87 billion; its shares were traded around $45.53 Tuesday with a P/E ratio of 55.51 and P/S ratio of 4.87. The trailing 12-month dividend yield of Oracle Corp stocks is 1.69%. The forward dividend yield of Oracle Corp stocks is 1.66%. Oracle Corp. had an annual average earnings growth of 10.30% over the past 10 years. GuruFocus rated Oracle Corp. the business predictability rank of 2-star.

See Wally Weitz’s portfolio here.

About the author:

Holly LaFon
I'm a financial journalist with a master of science in journalism from Medill at Northwestern University.

Visit Holly LaFon's Website


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