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March 31, 2015
Investment Style: Multi-Cap Value

Top Quarterly Contributors

Interval Leisure Group is a provider of non-traditional lodging, encompassing a portfolio of leisure businesses from exchange and vacation rental to vacation ownership. Interval’s stock rebounded after the company posted solid quarterly results and issued encouraging 2015 guidance. Revenue per member is rising again as the company anniversaries the four large contract re-pricings from early last year. Management also better articulated plans for its recent timeshare acquisition, raised the dividend and increased its share repurchase authorization.
Martin Marietta Materials is a producer of granite, limestone, sand, gravel and aggregates products for the construction industry. In February, management reported strong aggregates volume growth and price increases across each of its geographic markets and issued robust 2015 guidance. In addition, Martin increased its synergy target for the Texas Industries acquisition from $70 million to $100 million annually and announced a new share buyback plan. If the plan is completed it would represent approximately 30% of the company’s outstanding shares.

Top Quarterly Detractors

Discovery Communications is a world-class provider of non-fiction, global pay-tv programming. Weakness in U.S. television advertising, foreign currency headwinds, and increased investments in niche European sports rights muted the company’s 2015 outlook and pressured Discovery’s shares during the quarter. We think the company’s investments are strategically sound and should earn solid returns over the next several years. We also believe that the core business will prove more resilient than many investors fear, especially overseas.
Redwood Trust Redwood Trust’s fourth quarter earnings fell short of expectations due in part to lower commercial mortgage banking income and decreased valuations for mortgage servicing rights (MSR’s). The company’s 2015 volume expectations for jumbo residential, conforming residential and commercial lending point to increased earnings potential this year. In the meantime, Redwood pays a healthy dividend that yields more than 6% at the current stock price.

Top Fiscal Year Contributors

Valeant Pharmaceuticals International is a specialty pharmaceutical and medical device company that develops, manufactures, and markets a range of generic and branded generic pharmaceuticals, over-the-counter products and medical devices. During an eventful fiscal year, Valeant’s strong underlying business performance carried the day as the company battled Allergan’s aggressive negative public relations campaign. Valeant’s dermatology business performed well ahead of our expectations, driven by broad-based strength across its portfolio as well as the successful launch of fungal treatment Jublia. In February, Valeant announced a definitive agreement to acquire Salix Pharmaceuticals for slightly over $15 billion. We anticipate Salix earning attractive high teens returns for Valeant over time. The combination of healthy double-digit organic sales growth and falling acquisition-related cash restructuring expenditures drove a noticeable increase in excess cash generation, creating the capacity for the company’s transaction with Salix.
Liberty Global through its subsidiaries provides video, broadband internet, fixed-line telephone and mobile services across 14 countries. Liberty Global announced solid operational results in the Big 5 geographies: UK, Germany, Switzerland, Belgium and The Netherlands; and successfully closed the acquisition of their largest cable competitor in Holland, Ziggo. Additionally, Virgin Media in the UK (a subsidiary of Liberty Global as of June 2013) announced “Project Lightning.” Virgin intends to invest 3 billion pounds to connect four million additional homes to its network resulting in broadband speeds substantially faster than telco-based competitors. We believe the project represents a very good use of capital and should generate attractive future returns.
XO Group is a life stage media company. It serves its audience with information, products, and services during critical life stages: planning a wedding, sharing life as a couple for the first time, and planning for the birth of a first child. In early 2014 new management announced a period of heightened infrastructure investment. Since then, management has clearly articulated the company’s intended path and investors have shown confidence in their plan.

Top Fiscal Year Detractors

Range Resources is a Texas-based independent natural gas, natural liquids, and oil company engaged in the exploration, development and acquisition of primarily gas properties. Falling domestic natural gas and natural gas liquids (NGL) prices in addition to regional oversupply in the northeast portion of the United States continue to be stiff headwinds for Range Resources in the near-term. Absent a demand shock from a worsening U.S. economy, we expect the present supply/demand imbalance will work itself out over the next 18-24 months. In the interim, we believe Range will continue to grow per share production and reserves in a highly capital efficient manner.
Avon Products is a manufacturer and marketer of beauty and related products. Last year, investors became quite concerned by worse-than-expected results in the company’s North American business as well as missteps in Brazil, which is Avon’s top market. Later in the year Avon demonstrated some progress in its long turnaround, but worries over the transactional impact of the rapid rise of the U.S. dollar against the Brazilian Real and the Russian Ruble erased the positives from the operational improvement.
Apache Corporation is an independent energy company that explores, develops and produces natural gas, crude oil and natural gas liquids. Apache shares suffered alongside most of the energy sector as oil and natural gas prices fell sharply. We sold our stake in Apache during the fourth quarter to focus our capital in two higher conviction producers, Range Resources and Pioneer Natural Resources, with better assets trading at similar discounts to our calculated intrinsic value.

New Positions This Quarter

No new positions were added in the first quarter of 2015.

Positions Eliminated This Quarter

No positions were eliminated in the first quarter of 2015.
As of 3/31/2015: Interval Leisure Group comprised 2.1% of the Weitz Partners Value Fund's net assets; Martin Marietta 2.5%; Discovery Communications 2.2%; Redwood Trust 2.7%; Valeant Pharmaceuticals International 4.5%; Liberty Global 5.4%; XO Group 1.1%; Range Resources 2.8%; Avon Products 1.4%; Apache Corporation 0.0%.
Investors should consider carefully the investment objectives, risks, and charges and expenses of the Fund before investing. The Fund's Prospectus contains this and other information about the Fund and should be read carefully before investing. Portfolio composition is subject to change at any time and references to specific securities, industries, and sectors referenced in this letter are not recommendations to purchase or sell any particular security. Current and future portfolio holdings are subject to risk.
Weitz Securities, Inc. is the distributor of the Weitz Funds.