Wally Weitz Has Carved Out His Own Niche In The World Of Value Investing By Russell Hubbard, Omaha.com
There was a buying frenzy midmonth at Omaha’s Weitz Investment Management, operator of highly rated mutual funds.
Six new stocks in the previous 10 days, as the benchmark Standard & Poor’s 500 fell 7 percent from mid-September to mid-October, bringing dozens of new stocks into the undervalued realm prized by the buy-cheap-and-hold-forever fund managers such as Wally Weitz, founder and chief of the company that bears his name.
“Six stocks in 10 days, that is usually a year and a half supply for us,” Wally Weitz, with a laugh, said of his new purchases, stocks he has coveted for years but were too expensive for his tastes until the recent downturn.
Wally Weitz is what is known on Wall Street as a value investor, one who looks for gems in the bargain bin. For these investors, times like these are prime time. The Standard & Poor’s 500 is down about 6 percent since reaching a 2014 peak on Sept. 18, meaning some very strong companies are on sale. Citing industry disclosure rules, Wally Weitz declined to name his recent buys until the filing of the next investor update.
Anyone specializing in value investing, particularly in Omaha, shares the stage with some big names, none bigger than Warren Buffett. The Oracle of Omaha is chairman and chief executive of Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B), whose annual returns to investors are a value-minded dream: 19.7 percent compounded annually since 1965, doubling the Standard & Poor’s 500’s 9.8 percent.
But Wally Weitz has quietly and over many years carved out his own niche in the world of value investing, and says part of his success has come from applying lessons learned by observing Buffett and his methods.
“I consider him a mentor,” said Wally Weitz, who at age 65 is 19 years younger than Buffett, “but while we see each other from time to time, I have learned mainly from watching what he does with Berkshire and reading his letters.”
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There is one thread that stitches together all advocates of value investing. It is a 1934 book called “Security Analysis” by Columbia University professors Benjamin Graham and David Dodd. The book laid the groundwork for professional stock picking, concentrating on what are now considered the bedrocks of value investing — finding stocks that are cheap compared with their earnings prospects, buying at a price that offers a margin of safety in case something goes wrong, estimating a business’s worth by projecting the present value of expected future cash flows.
“Investing is most intelligent when it is most business-like,” Graham wrote in the book, in nine words exposing buying on the rumor, selling on the news and a host of other techniques based on market momentum and trend direction for what they really are: gambling.
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