Thursday’s stock market drop was a buying opportunity for Wally Weitz, a man who fashions his investment firm’s “value” strategy after Warren Buffett’s.
“We invested $27 million of our cash reserves today,” Weitz told more than 200 shareholders at the annual meeting of Wallace R. Weitz & Co.
“In days like today, when we think we know what a company is worth and the stock goes down 5 percent, it’s just an opportunity to buy more of it,” he said.
The Dow Jones industrial average fell 376 points, and all the major indexes were down more than 3 percent. Many investors attributed the plunge to worries about Europe’s debt crisis.
However, Weitz said that stocks generally appeared to have been doing better than the underlying businesses and that volatility could continue for several years as the economy recovers from the recession.
Last year’s stock market recovery helped Weitz & Co.’s four stock market funds Value, Partners Value, Hickory and Partners III Opportunity. All those funds beat the 49.7 percent return by the Standard & Poor’s 500 during the Weitz firm’s fiscal year, which ended March 31.
Partners III led the way with a 62.1 percent return, followed by Hickory’s 61.1 percent. Value and Partners Value each returned 55.1 percent.
That was a far cry from the year before, when the S&P fell 38.1 percent, all four Weitz funds lost more than 26 percent of their value, and the Value Fund dropped 38.6 percent.
Through 2009, Weitz & Co. grew from $2 billion to $3 billion in assets under management.
Weitz uses a value investing strategy similar to Buffett’s. Both look for companies that have strong balance sheets, hold competitive positions in their industries, generate cash and have good management.
Weitz credited several major stock holdings for his firm’s performance, including gains in Buffett’s Berkshire Hathaway Inc. and Liberty Media, a communications and electronic retailing company with interests in QVC’s televised shopping network and other cable programs.
Weitz said his firm avoided bank stocks for the past few quarters because that sector faces potential regulatory changes, higher capital requirements, high levels of credit losses and rising interest rates.
Health care companies also face challenges under new federal regulations, and Weitz & Co. has reduced its exposure in that industry over the past few quarters, Weitz said.
Weitz & Co.’s assets at the end of March included $2.1 billion in its four stock funds. The Balanced Fund, made up of about 60 percent stocks and 40 percent bonds, held $78 million.
A bond fund called the Short-Intermediate Income Fund ballooned in size as people sought safety during the recession. The fund held $127 million two years ago, $182 million at the beginning of its latest fiscal year and $672 million at the end.
Another bond fund, the Nebraska Tax-Free Income Fund, held about $82 million in assets.
The Government Money Market Fund, which provides safety and liquidity, held about $83 million.
Contact the writer:
444-1117, joe.ruff@owh.com
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