At Weitz Investment Management, we
believe successful investing is driven by our ability to identify well-run
companies with strong long-term prospects and to then have the discipline and
patience to buy them at a discount to our estimate of intrinsic value. We call
this approach Quality at a Discount investing.
Value driven, private-buyer mindset
Quality at a Discount
Quality at a Discount is a simple concept, but it’s driven by a sophisticated, research-based process. Our team of analysts looks at six key factors of high-quality businesses to determine where they fall on our proprietary Weitz Quality Score Matrix. From there, we use discounted cash flow analysis and a stringent equity discount rate to determine the right price to pay.
Graham, regarded as the father of value investing, coined the term “margin of
safety” and considered it to be value investing's central concept. This margin
is the difference between our calculation of a company's intrinsic value and
its current stock price. As value investors, we first measure what an informed
buyer would pay to own the whole business, then we determine if the stock price
reflects that appraisal. High-quality businesses that can be purchased with a
margin of safety often find a place in our funds.
Determining a company’s value
have spent over four decades fine-tuning our valuation process. We analyze the
financials, evaluate the management team and determine the company's place in
its industry. We also calculate the present value of the company's estimated
future free cash flows. It is our deep analysis that positions us to determine
what a knowledgeable buyer would pay to own the business outright.
Valuation is our North Star. Once we've assessed a company's
value, we can determine what its stock price should be today. Our aim is to buy
shares at a discount to intrinsic value. If a well-run company with excellent
prospects is not currently selling at a discount, we place the company on our
fully vetted actionable investment list and wait for the price to turn in our
Included is a reference to the term “margin of safety." This term refers to purchasing securities at a price that is less than our estimate of intrinsic value. A potential “margin of safety” may limit downside risk and optimize the potential for growth.