Wally Weitz is Omaha’s second-most well-known investor. But so far this year, he’s beating the first.
The first, of course, is Warren Buffett, the “oracle of Omaha,” whose investment company Berkshire Hathaway is something of a legend for its phenomenal long-term gains.
But Weitz, whose Wallace R. Weitz & Co. runs three mutual funds, has outperformed Berkshire this year. His biggest fund, the $2.3 billion Weitz Value Fund, has beaten Berkshire the past three years.
“He’s been knocking the cover off the ball,” said Geoff Bobroff, an independent investment management industry consultant in East Greenwich, R.I.
Like Buffett, Weitz made investments in value stocks — companies temporarily out of favor with Wall Street — that have paid off. The challenge now for his 16-year-old firm is to maintain the return as cash, some of it generated by his sudden notoriety, pours into his firm. That, and the long bull market, has Weitz trying to tamp down expectations.
“Lots of investors are bound to be disappointed,” he said, because market returns in the next five to 15 years are likely to be much lower than recent gains. “I assume our relative performance will cool off.”
That performance has earned Weitz’s three funds the top five-star ratings from Morningstar, and lured a net $1.3 billion of new investment in the first half of 1999, according to Financial Research Corp. in Boston.
Much of the inflow came after Weitz’s funds were added to Charles Schwab Corp.’s mutual-fund supermarket. After years of drawing new customers by word of mouth, the rush of cash could make Weitz’s job tougher.
The Weitz Value Fund has gained 14.2 percent this year, through last week. Berkshire — legendary because $10,000 invested when Buffett took over in 1965 would be worth more than $50 million today — is down 8 percent for the year. Weitz’s other funds have had similarly good records: the Weitz Partners Value Fund is up 16 percent on the year, and the Weitz Hickory Fund is up 20.1 percent.
“What’s remarkable is the performance was achieved in a difficult period for value-based shops,” said Kunal Kapoor, a Morningstar analyst.
The Weitz funds’ returns have benefitted from holdings in media and telecommunications stocks, which have soared the past year amid industry consolidation.
Of late, though, Weitz has been holding much of his portfolio in cash, up to 30 percent of his portfolio. And when he talks about the market, he frets about valuation levels that may be too high — the same sort of comments Buffett has been making of late.
Still, Weitz dismisses any comparison between his recent performance and Buffett’s.
“I don’t think Buffett’s losing any sleep,” said Weitz. “It’s flattering when people mention us together, but that’s because we’re both Omaha investors. I wish there were more similarities.”
