Weitz: Investors Should Take Comfort In What They Ignore

Johnny HopkinsWally WeitzLeave a Comment

In his latest video at Weitz Asset TV, Barton Hooper, Director of Equity Research says investors should take comfort in what they ignore. Here’s and excerpt from the video:

Well, you know, I said there’s a certain comfort in knowing what to ignore. And I think energy and commodities is a really good example of that. When you look at energy and commodities, and I’ll just use energy as the overall example here, those businesses don’t really fit into our Weitz quality framework. In fact, if you look at some of these elements, such as cash flow consistency, a competitive position, or reinvestment rates, they really don’t score well in any of those areas.

And in fact, our team doesn’t believe we have a discernible edge in looking at those, because ultimately what determines those factors is the price of the commodity itself, in this case, oil. And if you’re having to rely on only one factor such as that, it becomes really difficult to understand the path of the business and how it will create value over the long term.

When you think about it, our team’s most precious natural resource is actually our time, and we believe the most productive use of that time is not focusing on price movements of commodities but understanding the underlying drivers of a quality business. And so that’s what we do day to day.

However, that doesn’t mean that the share prices of the businesses we own aren’t going to be impacted by energy prices. And more importantly, when energy prices or commodities are rising, certainly those shares are probably going to do better than some of the businesses we own. Maybe not all of them, but certainly some of them.

But we tell our team, don’t stare enviously at charts of businesses that we never really want to own. Instead, let’s keep our heads down and keep looking and doing what we know best and performing the due diligence, always being on the lookout for quality business. And over time, that’s going to work really well for us and our investors.

You can watch the entire interview here:

Weitz: Investing Amid Market Volatility and Global Tensions

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