A rare interview with Great Value Investor Wally Weitz on finding opportunities where others are seeing losses.
Wally Weitz: Valuable Losses
Experience counts. This week’s guest is a veteran value investor of the Warren Buffett school of investing, who hails from the same town Omaha, Nebraska and is a long time Berkshire Hathaway shareholder.
He is Wally Weitz, Chief Investment Officer and Portfolio Manager of Weitz Investment Management, which he founded in 1983. It now has about $5 billion dollars in assets under management in several mutual funds and separate accounts.
Gates Capital Management's Excess Cash Flow (ECF) Value Funds have returned 14.5% net over the past 25 years, and in 2021, the fund manager continued to outperform. Due to an "absence of large mistakes" during the year, coupled with an "attractive environment for corporate events," the group's flagship ECF Value Fund, L.P returned 32.7% last Read More
Since its 1983 inception, Weitz has been the sole portfolio manager of the Weitz Partners III Opportunity Fund, a multi-cap fund with the ability to short. Partners III has delivered nearly 13% annualized returns since then, beating its benchmark over the last 20 and 10 year periods, although it has lagged over the last 5 years, as have several of its value peers.
Weitz also co-manages several other funds including the flagship, long-only Weitz Partners Value Fund. In a recent letter to his shareholders Weitz wrote this about the market’s performance: “As investor enthusiasm is shaken and the markets get more volatile we feel better about the investment outlook.” On this week’s show, he’ll explain how much better he is feeling now and what he is doing about it!
One of the most interesting exchanges I had with Weitz was about a multi-year holding he sold last year at a big profit. In October he sold his last positions in Valeant Pharmaceuticals, a controversial company which has been making headlines recently because of accounting issues.
It was why Weitz started to question his Valeant investment that was so interesting, an offhand remark at a dinner by Valeant’s CEO Michael Pearson:
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.” 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.
That was just one of the insightful observations Weitz made in this week’s interview, including in his EXTRA interview, when he talks about how being an introvert helps him find some of his best investment ideas.
Have a wonderful weekend and make the week ahead a profitable and productive one.
Wally Weitz: Stick With Your Financial Discipline
- Have a plan you can live with
- Don’t be distracted by outside events
- Have one, two or three years of living expenses to prevent selling under duress
- Keep some cash in portfolio to take advantage of market declines
- Put cash to work in high conviction investments that have fallen
Wally Weitz: Sleep At Night
- Berkshire Hathaway Inc B (BRK.B)
Price: $131.05 on 2/23/16
52-week range: $123.55 – $149.39
Previous appearances by Wally Weitz from the WEALTHTRACK archives:
Wally Weitz: Valuable Work
What are the optimum conditions that enable value manager, Wally Weitz to find his best investment ideas? The Weitz Funds’ founder and Chief Investment Officer says it starts with being an introvert.