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Fund Spy

Weitz Funds Follow a Predictable Path

This shop's investment culture has been consistently great.

Change isn't a four-letter word at the Weitz funds, but it's rare and measured when it does happen. Wally Weitz has headed the firm since its launch nearly 30 years ago, and its strategy and process have never changed. Turnover among investment professionals is rare and the product mix has been focused and stable. Even the firm's one small, detracting feature has been a constant.

One Style Fits All
Weitz has a strong and established investment culture. Wally Weitz founded the firm in 1983 and is still at the helm, running the advisor and managing most of the funds and institutional accounts in the same manner. The investment team is small, comprised of three portfolio managers and a handful of analysts. The firm has a compact fund lineup as well. It doesn't chase trends or launch flavor-of-the-month offerings, instead sticking with its small stable of seven established funds. The bulk of the firm's assets are in three funds that are more than 20 years old and that have great records.

All the firm's funds share the same underlying philosophy. The firm is located in Omaha and follows a Warren Buffett-inspired strategy. But Weitz and his team differ a bit from modern-day Buffett with their penchant for contrarian investments. The process always has been purely bottom-up and the managers load up on areas where they see the most long-term value and they often put the bulk of assets in just a few sectors. They make no effort to ape a benchmark or look like their peers. Patience is critical to executing their strategy and the managers have consistently exhibited it--turnover is well below average.

Lessons Learned
The managers have shown the ability to learn from sins of omission and commission. They are introspective but don't go overboard in an effort to win the last war. For example, the equity funds took a hit in late 2007 when they added to a number of financials, including troubled Countrywide Financial and American International Group, which slid further. The team reviewed the situation and discovered they had underestimated the potential damage from a decrease in the firms' most lucrative business lines. But they didn't run scared and abandon financials. In fact, after running a similar analysis on struggling mortgage REIT Redwood Trust, they boosted their stake and the stocks then rebounded. Ditto with  American Express (AXP), which quickly turned into a big winner.

The Little Things
Retention of key investment personnel has been very good. Analysts and managers make a career at Weitz. This lends stability to the process and results. This gives the funds a very predictable risk/reward profile, making it easier for investors to understand how they will fit and function in a portfolio.

Shareholder communication is good, frequent, and clear. The firm's website posts regular commentaries that give details on fund performance and recent portfolio moves, including detailed analysis of some individual securities. Periodic calls with advisors add further details, and are made available in transcript form. A full archive of past shareholder letters provides further context.

A Small Fly in the Ointment
Weitz's funds aren't cheap. With one exception, they are pricier than two thirds of their similarly distributed peers. The old saying that price is what you pay and value is what you get comes into play as the funds have all been stellar performers over time. But, all things being equal lower expenses absolutely would be better.

Weitz does most everything right and is a very good steward. The shop sticks to its knitting and has delivered for shareholders over time.


Michael Breen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.