Wallace Weitz Reports Q3 Porfolio Updates: Top Reductions in GOOG, EXP and CMCSK

Omaha-based Weitz Funds, managed by its president and founder, Wallace Weitz , recently updated its portfolio with a total of 18 third quarter transactions, 9 of which were reductions.

The three reductions within the quarter that made the most impact to Weitz's portfolio were Google Inc. ( GOOG ), Eagle Materials Inc. ( EXP ) and Comcast Corp. ( CMCSK ).

Having been in business for almost three decades, the Weitz Funds relies highly on the renowned investment terms such as "margin of safety" and "circle of competence." Familiarity with the company or industry is key when Weitz analysts seek prospective stocks as well as determining a company's value through its estimated future free cash flows.

In the Weitz Funds' third quarter shareholder letter, which was penned by Weitz and fellow fund portfolio manager Bradley Hinton, the following statement expressed one aspect of the fund's valuation methods: "Our selling is driven by valuation levels, not a "market timing" call... this exposes our funds to the risk of under-performing the market over the near term, but we believe that being disciplined and price-sensitive is an important part of our investment process."

Besides a stock's market price, Weitz makes sure to forecast a company's cash flow for several years because it shows "how wisely management re-invests the capital" that the business generates, according to its website philosophy description.

As of Sept. 30, Wallace Weitz owns 62 stocks with a total value of $2.1 million. These are the sector weightings of the firm's portfolio:

Consumer Services 21.10%
Financials 20.90%
Technology 17.20%
Health Care 14.60%
Industrials 11.40%
Oil & Gas 9.30%
Consumer Goods 4.40%
Basic Materials 1.20%

In addition to the nine reductions, Wallace Weitz 's portfolio updates included complete sells of all current shares with five companies, one add and three new buys.

Google Inc. ( GOOG )

Wallace Weitz reduced 28.92 percent of his stake of Google inc. ( GOOG ) in the third quarter. The impact to their portfolio due to this sale was 0.98 percent, and left Wallace Weitz with a total holding of 91,189 shares.

Google is currently selling at $663.81 per share, and has a market cap of $216.83 billion, a P/E (ttm) ratio of 20.5, a P/S ratio of 5.7 and a P/B ratio of 3.2. Its P/S ratio is close to its one-year high.

Expanding search-engine site Google has a Business Predictability rank of 2.5 out of 5 stars, a Financial Strength of 9 out of 10 and a Profitability and Growth rank of 9 out of 10 on GuruFocus.

Eagle Materials Inc. ( EXP )

Dallas-based Eagle Materials Inc. ( EXP ) is a company that manufactures building materials including Portland cement, concrete and aggregates, gypsum wallboard and recycled paperboard.

Wallace Weitz reduced its shares of Eagle Materials by 90.99 percent, which impacted its portfolio by 1.27 percent.

Eagle Materials has a Business Predictability rank of 1 out of 5 stars, reflective of its unsteady revenue over the past couple of years.

Wallace Weitz first introduced the stock to his portfolio since the third quarter of 2007 starting off with a little over 25,000 shares. After this recent transaction, Weitz now sits with 72,000 shares.

With a stock dividend yield of 0.8 percent, Eagle Materials is close to its five-year low. Its market price of $52.68 is at its five-year high; its P/E, P/B and P/S ratios are all experiencing highs as well.

Comcast Corp. ( CMCSK )

In Wallace Weitz's third quarter shareholder letter, it stated:

"Investors do not want to be "left out" of a rising market. In fact, many professional money managers face 'career risk' if they under-perform their benchmark as a result of being less than fully-invested. As a result, they often turn to the most "conservative" stocks that are available to them. We have seen signs of this as consumer staples and other 'defensive' stocks have generally out-performed the more cyclical and leveraged issues. Anheuser-Busch ( BUD ) (beer), Diageo ( DEO ) (spirits), and Comcast (CCS) (cable TV and NBC Universal) have been beneficiaries of this phenomenon and as a result their stocks have moved above 90% of our base case valuations. These are great companies, but to paraphrase Ben Graham, 'At too high a price, even the stock of a great business becomes a speculation.'"

CMCSK data by

Broadband cable, e-commerce and television programming company Comcast Corp. ( CMCSK ) is selling close to its 10-year high. Its market price is $35.39 per share, with consistently growing revenue and operating margin, as well as a P/E and P/S ratio close to its two- and three-year lows.

With a Business Predictability rank of 4 out of 5 stars, Comcast has a Profitability and Growth rank of 9 out of 10 and a Financial Strength rank of 5 out of 10.

View the rest of Wallace Weitz's third quarter portfolio updates here. Also view Weitz's current portfolio details as well as other Wallace Weitz articles in GuruFocus' archives.About GuruFocus: tracks the stocks picks and portfolio holdings of the world's best investors. This value investing site offers stock screeners and valuation tools. And publishes daily articles tracking the latest moves of the world's best investors. GuruFocus also provides promising stock ideas in 3 monthly newsletters sent to Premium Members .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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