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Wally Weitz: Part II A Humble and Thoughtful Investor

Wally Weitz TLU Lecture:

After discussing Ben Graham’s book The Intelligent Investor and his value investing foundation, Wally Weitz expanded upon his 40-year career with my Texas Lutheran University students.

In doing so, Weitz acknowledged he is a total introvert. It was a refreshing revelation as he is the antithesis of the testosterone-driven stereotypes of Wall Street screaming “boo-yah.”

Instead, the soft spoken Omaha resident has mastered the lost art of sitting quietly amidst chaos while patiently observing, listening and absorbing information.

Weitz loves to read, recognizing that accomplishing investment success requires an insatiable desire for knowledge. “It is a never-ending treasure hunt you never totally figure out. The more you read and connect the pieces, the better you see the overall picture. All news and world events are interrelated and filters back to the investment question for me.”

In assessing differences to his firm’s success versus others, Weitz said most investors are very short-term in their outlook. The financial markets are too random over short time frames to allow for successful decisions. He added that, “Investing is not like a video game where you can just drop in and out when you want and expect to have success.”

Furthermore, he said fear and greed cause people to engage in unforced, emotional mistakes. Weitz’s goal is the opposite, which protects his clients in the process. This discussion recognized the importance of behavioral psychology upon finance decisions and the folly of emotional decisions. You must analyze data and have the conviction to take the opposite perspective to the prevailing sound-bite of the moment.

This contrarian bias is ever present as value investors often buy out-of-favor companies from disappointed growth-oriented traders whose overly pessimistic assessment have caused a bargain. This is frequently accompanied by tremendous noise from Wall Street. Weitz acknowledged that even though this is a logical approach, it is not without some pain.

When asked what he stays away from, Weitz avoids companies in which you can’t trust the ethics of management saying, “Do you want to be partners with someone you really don’t trust?”

He further counseled that organizational culture matters significantly. If management pressures employees to “make their numbers at all costs” bad things eventually happen. He referenced the recent Volkswagen scandal as an example.

The investment veteran also offered a well-known Warren Buffett quote: “Don’t do anything you wouldn’t want on the front page of the newspaper.” Weitz said the things that embarrass you in the newspaper are the ones that typically make for a dangerous investment. As such, the wise investor must know where the lines of ethical conduct are and not get close to them.

Weitz Investments doesn’t cover everything. Rather, the firm’s founder said “we try to know what we don’t know.” He added that a good investor doesn’t have to know everything, but what you do know should be deep and detailed. As such, you must stay within your circle of competency.

After four decades, Weitz acknowledges many scars from mistakes. Given this, the firm continues to be more creative as to what can go wrong, always testing assumptions along the way.

The seasoned investor shared an insightful perspective on goals and envy. He said quite often, greed or the actions of a neighbor, causes an investor to lose sight of what they should do. Weitz said in the 1980s the 30 Year US Treasury Bond was yielding 14%, but institutional endowment and pension managers didn’t load up on the risk-free asset—even though their required rate of return was often only 8%. Instead, they chased returns becoming obsessed with what someone else was doing. Be true to your goals. Avoid envy.

Additionally, Weitz said he wants to conduct his affairs in a manner that doesn’t cause him to wake up at 4 a.m. and worry. He is sensitive to listening to his own answers as he discusses decisions.  If his answers cause him to pause, he will take a step back, forcing himself to think harder and deeper.

At this point, Weitz doesn’t need to work. He loves the intellectual challenge.

When asked how he’d like to be remembered Weitz replied, “We did it better than others, we did it right, we helped clients better understand their money; the quality of our client’s lives are better because of investments we made and those investments allowed us to give more to charity.”

It was an education one will never find in a text book.

Dave Sather is a Victoria certified financial planner and owner of Sather Financial Group. His column, Money Matters, publishes every other week.

Originally published November 3 2015, Victoria Advocate