Tracking Wallace Weitz's Weitz Investment Management Portfolio - Q2 2019 Update

Summary

• Wallace Weitz's 13F portfolio value increased ~4% from $2.42B to $2.52B this quarter. The number of positions decreased from 75 to 72.
• Weitz Investment Management increased Booking Holdings while decreasing CarMax during the quarter.
• The top three positions are Berkshire Hathaway, Liberty Broadband, and Alphabet and they add up to ~24% of the portfolio.

This article is part of a series that provides an ongoing analysis of the changes made to Wallace Weitz’s 13F portfolio on a quarterly basis. It is based on Weitz’s regulatory 13F Form filed on 08/08/2019. Please visit our Tracking Wallace Weitz’s Weitz Investment Management Portfolio article for an idea on his investment philosophy and our last update for the fund’s moves during Q1 2019.

This quarter, Weitz’s 13F portfolio value increased ~4% from $2.42B to $2.52B. The number of holdings decreased from 75 to 72. The top three positions are at ~24% while the top five holdings are at one-third of the 13F assets. The largest stake by far is Berkshire Hathaway at ~14% of the portfolio.

Weitz Investment Management’s equity funds are Weitz Partners Value Fund (MUTF:WPVLX), Weitz Value Fund (MUTF:WVALX), Weitz Partners III Opportunity Fund (MUTF:WPOIX), and Weitz Hickory Fund (MUTF:WEHIX). The flagship Weitz Partners Value Fund (1983 inception) has generated alpha but the fund is behind the S&P 500 index over the last decade. The current cash allocation is just 1.5%: this is far below the ~18% average cash over the last decade.

Stake Disposals:

Liberty Media Formula One (FWONA) (OTCQB:FWONB): The very small 0.51% stake in FWONK was disposed during the quarter.

New Stakes:

None.

Stake Increases:

Berkshire Hathaway (BRK.A) (BRK.B): Berkshire Hathaway is a very long-term stake and the largest holding in the portfolio at ~14%. Recent activity follows: Last three quarters had seen a ~30% selling at prices between $283,336 and $336,000 while this quarter there was a marginal increase.

Note: Wallace Weitz is known to have owned Berkshire Hathaway stock continuously since 1976 riding it from around $300 per share to the current price of $317,308.

Alphabet Inc. (GOOG) (GOOGL): GOOG was a minutely small position first purchased in 2008. The current large (top three) 4.43% of the 13F portfolio stake was built in 2010 and 2011 at a cost-basis around $250. Recent activity follows: Q4 2015 saw a ~40% reduction at prices between $608 and $777. The three quarters through Q1 2017 had also seen a ~10% selling at prices between $692 and $836. The stock currently trades at $1234. Last few quarters had seen only minor adjustments. There was a ~4% stake increase this quarter.

Liberty Sirius (LSXMA) (LSXMK): The 3.16% of the portfolio stake in Liberty Sirius stock came about as a result of Liberty Media’s recapitalization into three tracking stocks in April 2017. The position was reduced by around two-thirds since. The first three quarters of 2018 had seen a combined ~17% trimming while the next two quarters saw a similar increase. This quarter saw a marginal increase.

Charles Schwab (SCHW): SCHW is a 2.28% portfolio stake established in Q3 2018 at prices between $49 and $54 and the stock currently trades below that range at $43.07. For investors attempting to follow Weitz, SCHW is a good option to consider for further research. There was a ~60% stake increase in Q4 2018 at prices between $38 and $52 and that was followed with a ~8% increase over the last two quarters.

Note: In their Q3 2018 commentary, their conservatively estimated intrinsic value of SCHW was indicated to be in the 60s.

Booking Holdings (BKNG): BKNG was a minutely small stake as of Q3 2018. Last three quarters have seen the position built to a 2.24% portfolio stake at prices between $1617 and $1998. The stock is now above that range at $2041.

Note: In their Q2 2019 commentary, BKNG was profiled as an undervalued holding – temporary factors shadowing a strong business with scale.

DXC Technology (DXC): DXC position was increased by a whopping ~750% in Q3 2017 at prices between $76 an $86. Last three quarters of 2018 had also seen a combined ~50% increase at prices between $50 and $96. There was a ~8% trimming last quarter while this quarter saw a ~25% stake increase at prices between $46.50 and $66. The stock is now well below those ranges at $32.48. The stake is at 1.68% of the portfolio.

Note: The buy thesis was on the idea that CEO Mike Lawrie achieved cost-synergies while at CSC and a similar playbook is planned for the integration of Hewlett Packard Enterprise services business.

Box Inc. (BOX): BOX is a small 1.13% of the portfolio position established last quarter at prices between $16.75 and $25 and increased by ~55% this quarter at prices between $17 and $21. The stock currently trades near the low end of those ranges at $17.64.

Summit Materials (SUM) and Vulcan Materials (VMC): These two small positions were increased during the quarter. Most of the 1.86% SUM stake was purchased in H2 2018 at prices between $11.50 and $27. Last quarter saw minor selling while this quarter there was a ~10% increase. The stock is currently at $22.52. The bulk of the 1.73% VMC position was established in H2 2018 at prices between $88 and $130 and the stock is now well above that range at $145. Last two quarters have also seen minor increases.

Qurate Retail Group (QRTEA) previously Liberty Interactive: The original QRTEA position was from 2011 in the mid-teens price range. Recent activity follows: Q1 to Q3 2017 had seen a combined ~23% reduction at prices between $18.50 and $25 and that was followed with a ~50% selling over the next two quarters at prices between $21.50 and $29. The stock is currently at $11.59. Last two quarters had seen minor trimming while this quarter there was a ~30% stake increase at prices between $12 and $17.50. The stake still relatively small at ~1% of the portfolio.

Note 1: Weitz believes Amazon effect has caused investors to run but insiders including Malone has been buying - at 7x cash-flow, minor improvements in business should cause the stock to pop.

Note 2: The prices quoted above are adjusted for the CommerceHub (CHUBA) spinoff in July 2016.

Guidewire Software (GWRE), JPMorgan Chase (JPM), Markel Corp (MKL), and Thermo Fisher Scientific (TMO): These very small (less than ~1% of the portfolio each) stakes were increased during the quarter.

Stake Decreases:

Liberty Broadband (LBRDK): LBRDK is a top-three 5.88% of the 13F portfolio stake established in Q4 2014 as a result of the spinoff of Liberty Broadband from Liberty Media. Liberty Media shareholders received one share of LBRDA for every four shares of Liberty Media held. In Q1 2015, there was a ~60% increase at prices between $44.50 and $56.50. Q1 2016 saw another ~24% increase at prices between $44 and $59. The position had seen minor trimming since Q3 2016. It currently trades at $109. Last year saw a combined ~14% selling at prices between $69 and $97 and that was followed with a ~24% reduction last quarter at prices between $72 and $94. This quarter also saw a ~13% selling. Weitz is harvesting gains.

Laboratory Corp of America Holdings (LH): LH is a large (top five) 4.20% very long-term stake. The bulk of the position was built in the 2008-2010 timeframe at lower prices. The stock currently trades at ~$173. There was a ~8% selling in Q2 2018 at prices between $160 and $189. Q4 2018 saw a ~12% stake increase at prices between $121 and $174 and that was followed with a ~2% trimming last quarter. This quarter also saw a ~9% trimming.

MasterCard Inc. (MA): MA is a large top five 4.20% stake established in Q4 2014 at prices between $70 and $89. Q3 2015 & Q1 2016 saw a stake doubling at prices between $80 and $98. The following two quarters had also seen a ~20% further increase at prices between $87 and $102. The stock currently trades well above those ranges at ~$276. 2017 had seen a ~15% trimming and that was followed with a one-third selling last year at prices between $152 and $223. Weitz is realizing gains. Last two quarters also saw a ~15% selling.

Visa Inc. (V): V was a minutely small stake as of Q3 2016. It is now a fairly large ~4% position. The bulk of the buying happened in Q4 2016 at prices between $75 and $83.50. The stock is now at ~$178. There was a ~17% reduction in Q3 2018 at prices between $132 and $151 and that was followed with minor selling in the last three quarters.

Liberty Global PLC (LBTYK): Liberty Global is a long-term holding that has been in the portfolio for more than a decade. It is currently at ~4% of the portfolio. 2017 had seen a ~12% trimming and that was followed with a ~16% reduction last year at prices between $20 and $37. The stock is now at $27.42. Last two quarters have also seen minor trimming.

CarMax Inc. (KMX): The 3.17% KMX position was purchased at a cost-basis below $60 per share in Q1 2018 and increased by ~45% next quarter at prices between $59 and $80. The stock currently trades at $86.53. Last three quarters saw a ~90% increase at prices between $57 and $81 while this quarter there was a ~20% selling at prices between $69 and $87.

Oracle Corporation (ORCL): ORCL is a 1.79% of the 13F portfolio stake. The original position was from Q4 2013 when around 1.75M shares were purchased at prices between $33 and $38. The position has wavered. Recent activity follow. Q1 2018 saw a ~13% increase at prices between $44.50 and $53. There was a one-third selling last quarter at prices between $45 and $55 and that was followed with minor trimming this quarter. The stock currently trades at $53.89.

Colfax Corporation (CFX): CFX is a 1.72% of the 13F portfolio position established in Q4 2015 at prices between $22 and $32. The stake has wavered. Recent activity follow. Q1 2018 saw a ~20% stake increase at prices between $31 and $42. Q4 2018 also saw a ~10% stake increase while last quarter there was a similar reduction. This quarter also saw a ~4% trimming. The stock currently trades at $30.50.

AON plc (AON): AON is a 1.63% long-term stake from 2010 established in the high-30s price-range. The five quarters through Q4 2017 had seen a two-thirds reduction at prices between $107 and $146. It now trades at ~$190. There was a one-third selling over the last two quarters at prices between $137 and $173. Weitz is realizing huge long-term gains. This quarter saw marginal trimming.

Linde plc (LIN): The Linde plc position came about due to the merger with Praxair. Weitz had ~170K shares of Praxair for which they received the same number of Linde plc shares. The stock has returned ~20% since the close of the Praxair transaction last October. Last two quarters have seen minor selling.

GCI Liberty (GLIBA): The 0.83% GLIBA stake came about as a result of the merger with Liberty Ventures in Q1 2018. Weitz had a 1.77% position in Liberty Ventures. The position saw a ~17% increase in Q2 2018 but was reduced by ~38% in Q3 2018 at prices between $45 and $51. The stock is now at $64.29. There was a ~6% trimming this quarter.

Transdigm Group (TDG): The vast majority of the 1.58% TDG position was purchased in Q4 2018 at prices between $310 and $370. The stock currently trades well above that at $515. Last two quarters have seen only minor adjustments.

Axalta Coating Systems (AXTA), Comcast Corporation (CMCSA), Dollar Tree (DLTR), Liberty Latin America (LILAK), Marvell Technology (MRVL), and Stanley Black & Decker (SWK): These small (less than ~1.5% of the portfolio each) positions were reduced during the quarter.

Kept Steady:

Facebook (FB): The 3.24% FB position was purchased in Q1 2018 at prices between $152 and $193 and increased by ~175% next quarter at prices between $155 and $202. There was another ~35% increase in Q3 2018 at prices between $160 and $218 and that was followed by a ~22% increase next quarter at prices between $124 and $162. The stock is now at ~$188. For investors attempting to follow, FB is a good option to consider for further research. Last quarter saw a ~7% trimming.

Note: Their 3^rd quarter 2018 commentary had the following on Facebook: although there are challenges, the digital properties (Facebook, WhatsApp, Instagram, and Messenger) are uniquely valuable – never have advertisers of all sizes been able to attain such a specific reach.

Intelligent Systems Corporation (INS): Weitz controls ~26% of Intelligent Systems Corporation. The 2.59% portfolio stake was kept steady during the quarter.

Redwood Trust Inc. (RWT): RWT is a 2.26% very long-term stake that has been in the portfolio for well over a decade. Recent activity follows: Last five quarters through Q4 2018 had seen a one-third selling at prices between $14.50 and $17.50 while last quarter saw a ~23% stake increase at prices between $15 and $16.20. The stock currently trades at $17.17.

Note: Weitz has a ~4.3­% ownership stake in Redwood Trust.

Texas Instruments (TXN): TXN is now a 1.81% of the portfolio stake. It was first purchased in 2010 in the mid-20s price-range. The majority of that position was eliminated in 2011 in the low-30s price range. In 2012, the stake was built back up in the high-20s price-range. Weitz realized huge gains from this position during the 2014-2016 timeframe. Recent activity follows: There was a ~6% trimming in Q4 2017 and that was followed with a ~22% selling next quarter at prices between $98 and $120. The stock is now at ~$130. There was a minor reduction last quarter.

Black Knight (BKI): BKI is a 1.79% portfolio position established in Q4 2018 at prices between $43 and $52 and the stock currently trades well above that range at $62.11. There was a ~7% increase last quarter.

Accenture PLC (ACN), Amazon.com (AMZN), Analog Devices (ADI), Danaher Corp (DHR), Diageo plc (DEO), Martin Marietta Materials (MLM), and Wesco Aircraft (WAIR): These very small positions (less than ~1% of the portfolio each) were kept steady this quarter.

Other very small (less than 0.5% of the portfolio each) positions in the portfolio include ACI Worldwide (ACIW), Apple Inc. (AAPL), Charter Communications (CHTR), Compass Minerals (CMP), Eagle Materials (EXP), Equity Commonwealth (EQC), Fortune Brands (FBHS), Gardner Denver (GDI), Liberty Braves (BATRK) (BATRA), Liberty Expedia (LEXEA), Microsoft (MSFT), Myers Industries (MYE), and Perspecta (PRSP). They also have minutely small positions in a bunch of index ETFs.

The spreadsheet below highlights changes to Weitz’s 13F stock holdings in Q2 2019:

Analyst’s Disclosure: I am/we are long BRK.B, MKL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.