An interview by Forbes with Weitz Value Fund Investment manager David Perkins:
Dave Perkins: Weitz Investment Management is an independent, employee-owned firm with approximately $6 billion in assets under management. Our investment philosophy is rooted in common sense –Â we look for attractive companies and seek to purchase their shares at a sizeable discount. Valuation is our North Star. We are disciples of Ben Graham’s idea of buying stocks only when presented with a sizeable margin of safety. We study individual businesses one at a time and build portfolios from the ground up, concentrating our investments in our best ideas. We’re big believers in active management at Weitz — that thoughtful stock picking wins over time. All of our employees invest a meaningful portion of their liquid net worth in the Funds alongside our shareholders. We win and lose together.
Wally Forbes: Sounds good.
Perkins: I’ve got three stock ideas that I’d like to share that make up a significant portion of our invested assets at present.
Forbes: Wonderful.
Perkins: I should start off by saying that everything we do at Weitz is team first because we believe our shareholders are best served by drawing on the sum total of our collective knowledge. I would like to acknowledge my colleague, Drew Weitz, who is the source of the first two stocks I’m going to cover today. He ably leads our media effort, which has been a fruitful area for us since the firm was founded roughly 32 years ago –Â and remains so today.
21st Century Fox (NASDAQ: FOX) is a name that’s probably familiar to many of your readers. It is one of our favorite investments at present. We’ve actually owned it before, as shareholders of News Corp from 2008 to 2010.
Roughly a year and a half ago, News Corp split itself into two separate publicly traded companies. A publishing business focused on newspapers, which still carries the News Corp name, and 21st Century Fox, which was our favorite portion of the combined enterprise at the time.
Today, Fox owns the Fox Broadcast Network, and 21st Century Fox movie and television studios. But the bulk of the company’s earnings and cash flow, and the central pillar of our investment thesis, is its strong collection of cable networks. These include Fox News, the FX Network, Fox Sports One, which was formerly the Speed Channel, National Geographic and a host of regional sports networks including the Yes Network, which many of your readers in New York will be familiar with.
We began buying the stock back in October as the debate around the future of paid television continued to build. We believe, as Fox’s management team does, that the present ecosystem will remain in place in the near and intermediate term. Cable network owners like Fox earn monthly fees –Â affiliate fees in industry parlance –Â from the large TV distributors like Comcast (CMCSA, Financial), Time Warner Cable (TWC, Financial) and Cox Communications in exchange for the right to carry their programming. Your monthly cable or satellite TV bill is essentially a collection of these affiliate fees.
From an investor’s perspective, these fees represent attractive streams of largely recurring revenue as most paid TV customers view television as a staple in their lives. Fox owns very attractive news and sports content, two areas that remain valuable to advertisers and media distributors alike as they tend to draw live and engaged audiences.
There’s undoubtedly a transition taking place in how and where media consumers are spending their time and money. Netflix (NFLX), Hulu and other so-called streaming video platforms are increasingly viable options for portions of the market that don’t desire 50 or more channels, or for those that simply want a smaller cable bill. However long and whatever path the transition takes, we believe that valuable content will always have a place, and that Fox is particularly skilled at creating and licensing it.
In the nearer term, we especially like the visibility of Fox’s affiliate fee growth opportunity, as well as the opportunity for greater distribution of Fox’s international channels. The potential success of Fox Sports One and Two as potential competitors to Disney’s ESPN Networks provides room for upside longer term.
continue reading: http://www.forbes.com/sites/wallaceforbes/2015/03/11/3-attractive-stocks-to-buy-at-a-sizeable-discount/2/
