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October 25, 2006


It Takes Courage to Buy Undervalued Assets

Weitz Funds Semi-Annual Report, Sep. 30, 2006

Wally wrote something curious in this latest letter:

We are currently short small- and mid-cap indexes because they seem expensive relative to our stocks (many of which are large-caps these days). This may seem an unlikely departure from our “bottoms-up,” one-stock-at-a-time investment approach, but we believe that selling short over-valued stocks, individually or in groups, is just another form of value investing.

I suppose that’s true in theory, but judging overvaluation is a much trickier business than judging undervaluation, no?

This entry was posted on Wednesday, October 25th, 2006 at 2:56 pm (utc+8) and is filed under Trading and Investing.

3 Responses to “It Takes Courage to Buy Undervalued Assets”

  1. John said:
    October 26th, 2006 at 10:26 am

    I read an interview with Walter Schloss once, where he said a client wanted Schloss to tell him stocks that were overvalued so he could short them. Schloss said it was foolish thing to do, because shorting is a different game. So, FWIW, I’d never short something just because it’s overvalued. Then again, I don’t short anyway.

  2. C. Maoxian said:
    October 26th, 2006 at 10:57 am

    John: Yeah, I agree with you and Schloss (big fan of you both). Overvaluation can just go on and on, but we can always count on zero to mark undervaluation. ;-) I think Wally is down on his shorts.

  3. Maoxian » When Value Investors Stray from their Circle of Competence said:
    February 8th, 2007 at 11:40 am

    […] I thought it was curious when Wally Weitz said he was short mid-cap and small-cap stocks; frankly I thought Wally was out of his depth making that call: shorting “over-valued” stocks, is absolutely not just another form of value investing. […]

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