Wallace R. Weitz‘s Weitz Investment Management was founded in 1983 by Mr. Weitz, with a philosophy of investing in strong businesses at discounted prices to what a savvy buyer would likely pay for the company. In the more than three decades since, Mr. Weitz has gone from managing $11 million in client money to managing about $4 billion in funds.
2016 was not an exemplary one for the fund however, as the Weitz Value Fund’s Institutional Class posted gains of 3.13%, well off the 11.96% and 12.05% gains of the S&P 500 and Russell 1000 respectively. In the fund’s latest letter to investors, Weitz co-portfolio managers Brad Hinton and Dave Perkins discussed the performance of the fund’s favorite stocks in 2016, as well as some of the fund’s biggest moves in the fourth quarter as it positioned itself for 2017. We’ll look at their thoughts on the latter moves in this article, which includes four new positions opened during the fourth quarter.
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Visa Inc. (NYSE:V)
Visa is the first of the fund’s four new positions that were discussed in its Q4 investor letter. The fund likes the company’s recent reacquisition of Visa Europe, believing that it will allow the company to increase its market share and lower costs. It’s also bullish on the credit card space in general, expecting Visa to exhibit strong growth as emerging markets transition from cash to cards. The latter view is not surprising, considering that Weitz was also heavily invested in Mastercard Inc (NYSE:MA) on September 30, owning 797,039 shares valued at $81.12 million.
The addition of Visa Inc. (NYSE:V) to its portfolio by the end of 2016 appears to have worked out well for the fund, as Visa’s posted strong gains of 10% so far in 2017. The latest surge came on February 3 after Visa announced strong fiscal Q1 2017 results of $4.46 billion in revenue and $0.86 EPS, beating estimates by $170 million and $0.08 respectively. The company also noted that its aforementioned acquisition of Visa Europe is tracking well. 115 hedge funds in our database were long Visa on September 30.
Thermo Fisher Scientific Inc. (NYSE:TMO)
Next up is Thermo Fisher, which Weitz Investment Management likes for its diversified product portfolio and recurring revenue streams (it estimates that about 75% of the company’s revenue falls under the latter category). The fund pounced on the opportunity to grab the stock at what it believes to be a discount, after 18 months of flat shares from the middle of 2015 through the end of 2016. During that time, the fund’s estimate of Thermo Fisher’s value increased, opening the door to an investment (the fund invests in stocks that it believes are trading at no more than 80% of its estimated value).
Thermo Fisher is also enjoying a strong 2017, posting gains of 7.78%. Deutsche Bank recently initiated coverage of the stock with a ‘Buy’ rating and $163 price target, while it ranks as Barclays’ top pick among U.S Life Science Tools & Diagnostics stocks. Columbus Circle Investors cut its position in Thermo Fisher Scientific Inc. (NYSE:TMO) by 19% during the fourth quarter, to 730,879 shares.
We’ll check out three other moves made by Weitz Investment Management during the fourth quarter on page two of this article.