Q&A: Omaha's Other Oracle

Editor's Note: The following is an excerpt available exclusively at TheStreet.com from an interview originally published by Value Investor Insight.

Although he operates with a decidedly lower profile than his Omaha neighbor Warren Buffett, Wally Weitz's investment record speaks volumes. His flagship (WVALX Quote)Weitz Value fund has returned an average 15.7% per year for the 10 years through June 30, vs. 9.9% for the S&P 500. Since founding Wallace R. Weitz & Co. with $11 million in assets in 1983, Weitz now manages more than $7 billion.

Weitz is finding plenty to invest in these days -- primarily, he says, in "companies that are suffering from the usual assortment of temporary woes."

Have you found much to be excited about these days?

We've actually been finding several new ideas, primarily in companies suffering from the usual assortment of temporary woes -- quarterly earnings disappointments, skepticism about the potential of a turnaround or allegations of legal and accounting misbehavior. We've also found some genuine "growth" companies available at their most reasonable price levels in years.

What are some examples?

Three of the most significant purchases we've made recently are Tyco (TYC Quote), AIG (AIG Quote) and Wal-Mart (WMT Quote).

Wal-Mart is a prime example of a traditional growth stock that was finally available at a price we were willing to pay. Its growth has slowed and it has an image problem, but we still believe they'll grow earnings 12% to 14% per year through opening new stores, same-store sales growth and continuing to reduce costs through the use of technology. The stock price is lower than it was six years ago while earnings per share have more than doubled. It may be that people have been so distracted by energy, commodity and real estate stocks that companies like Wal-Mart are not getting the credit they deserve from the market.

With Tyco, we didn't join our value-investor friends in buying it three years ago when its financial scandal broke. Part of it was our bias for services companies rather than those that make tangible products. We were hard-pressed to make a quick valuation of what Tyco's health care, electrical products and other businesses were worth. Then a year ago we met with [CEO] Ed Breen and came away very impressed. He's brought new discipline and cost-cutting to basically sound businesses and is very focused on generating free cash and using it well. But with the stock then around $36, we decided we'd missed it.

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