This week’s Consuelo Mack WealthTrack features a rare interview with long-time “Great Value Investor” Wally Weitz, founder and portfolio manager of Weitz Funds , premiering nationwide beginning this Friday, February 26 at 7:30 p.m. on public television (check local listings**) and on wealthtrack.com. He tells Anchor and Executive Producer Consuelo Mack how he finds opportunities where others are seeing losses.
In this interview video preview, Weitz explains how an offhand dinner comment by Valeant Pharmaceuticals’ CEO Michael Pearson raised caution flags about the now controversial company, which ultimately led to its sale by Weitz Funds. While profitable Weitz said, “It’s not our proudest moment”:
Wally Weitz Reveals Early Valeant Pharmaceuticals Intl Inc (VRX) Red Flag
Below is a transcript.
Wally Weitz:
“It worked beautifully. The stock went from 30 to… peaked out around 240 or 250, and I think early on at a dinner with Mike Pearson several of us came out to New Jersey and went to dinner, and he said something. We asked, ‘How do you manage such a far-flung enterprise? You have businesses all over the world,’ and he says, ‘It’s easy. We just get people to run them that…we tell them, ‘Make your numbers or we’ll get somebody who will.’‘”
Consuelo Mack:
“That is not a nice…philosophy.”
Wally Weitz:
“That was sort of chilling to me, because I think an awful lot of the corporate blowups over the years, whether it’s Enron or whatever, maybe start off as legitimate companies that are well run, but when there’s pressure from the top to make the numbers, sometimes people succumb to that and bad things happen. So I was sort of on guard about it.”
Consuelo Mack:
“It’s so interesting that one phrase like that can just…”
Wally Weitz:
“Management’s so important. So anyway, I was kind of on guard about it, but they were making the acquisitions. They were doing very well. The stock kept going up. We sold probably three-quarters of our stock from the high 180s or so, up to 240 or 250 just on valuation basis, but we still had some left, and as it came down at first there was a question…there was a famous, I think it was a tweet from Hillary Clinton about price gouging in pharmaceuticals, that sort of…it was an idea that was already out there, but it made the stock drop sharply and some other ones like it. We checked our story and tried to assess the likelihood of actual price controls and so on, and decided that it was not really a business threat to them. But then the specialty pharmacy, the Philidor: it was an arrangement where they had spent a hundred million or more I think on an option to buy the company at a zero price, at a zero striking price. It seemed to me to be kind of a phony arrangement, and there was a lot of controversy about it, a lot of coverage, and people insisted it was totally legal and so on and so on. But it seemed as if maybe, it made you wonder what other kinds of arrangements there might be around the world.”
Consuelo Mack:
“Were going on.”
Wally Weitz:
“So we just sold it cold turkey, the rest of it, in October of last year. So what had been about a 400-percent profit was reduced to about a 300-percent profit. It was a good financial experience, but it’s not our proudest moment.”
Consuelo Mack WealthTrack Local Airdates
New episodes premiere every week nationwide on public television (check local listings)
**New York metro area:
Fridays at 7:30 p.m. on WLIW21, Saturdays at 8 a.m. on THIRTEEN and Sundays at 9:00 a.m. on NJTV
**Los Angeles area:
Saturdays at 8 a.m. on PBS SoCaL WORLD, Sundays at 11:30 p.m. on KLCS, Mondays at 4:30 p.m. on PBS SoCaL Plus, Tuesdays at 11:30 p.m. on KVCRDC Desert Cities Channel, and Wednesdays at 6:30 p.m. on KVCR-PBS
**Other markets:
http://www.aptonline.org/catalog.nsf/vLinkTitle/CONSUELO+MACK+WEALTHTRACK+XII
Online: New episodes stream Fridays on wealthtrack.com
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