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Wallace Weitz's Top 5 Buys in 3rd Quarter

- By James Li

Wallace Weitz (Trades, Portfolio), portfolio manager of Weitz Investment Management, disclosed last week his top five buys for the third quarter included a new position in Charles Schwab Corp. (SCHW) and increased bets in Facebook Inc. (FB), Vulcan Materials Co. (VMC), Summit Materials Inc. (SUM) and Marvell Technology Group Ltd. (MRVL).

Weitz's approach to value investing combines Benjamin Graham's price sensitivity and insistence on a margin of safety with a conviction that emphasizes qualitative factors like management quality over statistical measurements like historical book value and earnings. The guru's top three sectors in terms of portfolio weight are financial services, technology and communication services.

Charles Schwab

Weitz invested in 839,139 shares of Charles Schwab for an average price of $51.07 per share, giving the position 1.70% equity portfolio space. The company trades slightly above its 10-year median price-book valuation.


The manager said in his shareholder letter that Weitz Investment Management has placed Schwab in its "on-deck list" over the past several years, saying the San Francisco-based brokerage bank "gained market share from major banks and traditional brokers" with its "innovative, low-cost platforms tailored to both individuals and investment advisors." The company's earnings results suggest clients continue bringing new accounts and represent increasing share of assets.


Gurus with large holdings in Schwab include Dodge & Cox, PRIMECAP Management (Trades, Portfolio) and Frank Sands (Trades, Portfolio).



Weitz added 101,300 shares of Facebook for an average price of $181.03 per share, boosting the holding to 380,793 shares.


Weitz detailed in his letter that the Menlo Park, California-based social media giant "remains under a microscope:" while the company faces several headwinds, including declining daily active user growth, the firm's read of the data continues to suggest "user perception is far less negative than that of traditional media." The manager further mentioned Facebook, with its common advertising platform and portfolio of digital properties, has strong potential for double-digit organic growth.

GuruFocus strengthens Weitz's statement about Facebook's strong growth potential: the company's profitability ranks 9 out of 10 on several positive indicators, which include expanding profit margins and returns on assets that are outperforming 92% of global online media companies.


Other gurus riding Facebook's strong growth momentum include Spiros Segalas (Trades, Portfolio) and Steve Mandel (Trades, Portfolio).


Vulcan Materials

Weitz added 119,366 shares of Vulcan Materials, boosting the position 1,085.15%. Shares averaged $115.97 during the quarter.


The manager said in his letter he champions the construction aggregates industry's "high barriers to entry, strong pricing power and minimal risk of obsolescence." Demand for the Birmingham, Alabama-based company's products remains "as healthy as it has been" for over the past 10 years, enabling the possibility for attractive growth over Weitz's investment horizon. GuruFocus ranks Vulcan's profitability 8 out of 10 primarily due to strong returns on assets, expanding profit margins and a three-year revenue growth rate that outperforms 75% of global competitors.


Summit Materials

Weitz added 1,417,200 shares of Summit Materials, boosting the position 766.05%. Shares of the Denver-based construction materials company averaged $22.17 during the quarter.


GuruFocus ranks Summit Materials' profitability 3 out of 10 on several weak indicators, which include a three-year revenue decline rate of 29.50%, a rate that underperforms 96% of global competitors. Despite this, the company's operating margin of 20.41% outperforms 60% of global building materials companies.


Marvell Technology

Weitz invested in 1,283,500 shares of Marvell Technology for an average price of $20.57 per share, boosting the position 802.19%.


GuruFocus ranks Marvell's profitability 5 out of 10: even though the company's revenue has declined over the past five years, its operating margin and return on assets are still outperforming over 80% of global competitors.


Disclosure: No positions.

Read more here:

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  • Stanley Druckenmiller Sells Facebook, Buys PayPal in 3rd Quarter
  • David Tepper Boosts Klarman's PG&E, Slims Facebook in 3rd Quarter

This article first appeared on GuruFocus.