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Wallace Weitz Slims Down Long-Held Stake in Intelligent Systems

Weitz Investment Management leader Wallace Weitz (Trades, Portfolio) revealed last week he trimmed his long-held Intelligent Systems Corp. (INS) stake by 13.12%.


When picking stocks, the investor's Omaha, Nebraska-based firm combines Benjamin Graham's price sensitivity and insistence on margin of safety with a conviction that qualitative factors that allow the company to control its destiny can be more important than statistical values like book value and earnings.

According to GuruFocus Real-Time Picks, a Premium feature, the guru sold 284,095 shares of the Norcross, Georgia-based software company on Dec. 31, impacting the equity portfolio by -0.47%. The stock traded for an average price of $39.94 per share. It now represents 3.11% of Weitz's equity portfolio.

GuruFocus estimates he has gained 3,475.81% on the investment since establishing it in the third quarter of 2009.

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The software company, which provides technology solutions and processing services to financial technology and services markets, has a $347.47 million market cap; its shares were trading around $37.76 on Monday with a price-earnings ratio of 36.49, a price-book ratio of 10.39 and a price-sales ratio of 11.69.

The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.

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On Nov. 1, 2019, the company reported third-quarter results. It posted earnings of 34 cents per share on $9.5 million in revenue, which grew 76% from the prior-year quarter.

Boosted by healthy debt ratios and comfortable interest coverage, GuruFocus rated Intelligent Systems' financial strength 8 out of 10. The robust Altman Z-Score of 37.26 also indicates the company is in good standing financially.

The company's profitability did not fare as well, scoring a 5 out of 10 rating despite having strong margins and returns that outperform a majority of competitors. It also has a moderate Piotroski F-Score of 5, which implies operations are stable, and a business predictability rank of one out of five stars. GuruFocus says companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.

Weitz is Intelligent Systems' largest guru shareholder with 21.13% of outstanding shares. Jim Simons (Trades, Portfolio)' Renaissance Technologies and Chuck Royce (Trades, Portfolio) also have positions in the stock.

Portfolio composition and performance

Roughly half of Weitz's $2.43 billion equity portfolio, which is made up of 69 stocks as of the end of the third quarter, is invested in the financial services and communication services sectors.

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Technology stocks, which include Intelligent Systems, make up 17.22% of the portfolio. Other software companies he holds include Salesforce.com Inc. (NYSE:CRM), ACI Worldwide Inc. (NASDAQ:ACIW), Guidewire Software Inc. (NYSE:GWRE), Oracle Corp. (NYSE:ORCL), Box Inc. (NYSE:BOX), Perspecta Inc. (NYSE:PRSP), Microsoft Corp. (NASDAQ:MSFT), Accenture PLC (NYSE:ACN) and Black Knight Inc. (NYSE:BKI).

According to the firm's website, the Weitz Partners III Opportunity Fund posted a return of 33.48% in 2019, slightly outperforming the S&P 500's 31.49% return.

Disclosure: No positions.

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This article first appeared on GuruFocus.