| July 15
July 15 High stock prices are making cash a more
attractive option for long-term returns, Weitz Investment
Management said in a letter to investors, though the move away
from equities cut into the firm's performance in the first half
Wallace Weitz, president of the firm, and Brad Hinton,
director of research, said in the letter sent to shareholders
earlier this month that cash levels are in the "mid- to upper-
20 percent" range in its six funds, a higher-than-normal level.
The firm, best known for its Lipper Award-winning Weitz
Hickory Fund, noted that the Federal Reserve's measures to
provide liquidity, via its bond-buying program, and near-zero
interest rates have encouraged many investors to keep buying
stocks, but said it has been "wary" about the level of stock
prices, prompting it to hold more cash.
"We think the 'opportunity cost' of holding out for better
values is slight and that we will be rewarded for our patience,"
Weitz and Hinton wrote.
On Tuesday, Weitz said his outlook for the market would not
be influenced by remarks that Fed Chair Janet Yellen made
earlier in the day that many biotechnology and social media
stocks have "stretched" valuations.
"These moves can be accelerated or bounced around by
headlines from the Fed, but it doesn't really affect the
longterm," Weitz told Reuters.
The high levels of cash held by Weitz funds, at a time when
the S&P 500 rose 6.78 percent over the first half of the year,
cut into the firm's returns. Across the firms' six stock funds,
- which have nearly $4.08 billion in combined assets under
management - second-quarter growth ranged from 1.40 percent to
3.16 percent, with the Weitz Research Fund the best performer.
For the trailing 12 months, the firm's best-performing fund
is up 17.92 percent, compared with a 17.31 percent gain in the
High stock prices, rare bargains and low volatility are
creating unfavorable market conditions, Weitz wrote. Prices
aren't fluctuating rapidly enough for the firm to buy
"We have to be patient when there is little buying and
selling to be done, and prepared - with researched investment
ideas and cash - to act when opportunity arises," Weitz and
The firm's largest positions are in ADT and Liberty
Interactive Class A, according to Morningstar data.
The firm said it is on the lookout for companies that are
building the value of their business through acquisitions,
restructurings, entering new businesses or buying back shares.
Its position in Valeant, for example, has risen nearly
32 percent this year as it has pursued a bid for Allergan
, while its shares of DirectTV have rallied 33
percent on a takeover offer from AT&T.
(Reporting by Michael Leibel; Editing by Leslie Adler)