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Editor's Note: The following is an excerpt available exclusively at

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) - Get Weitz Value Investor Report

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



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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.

Then this June, after some earnings misses, the stock got to around $28, which was only 11 to 12 times our estimate of this year's true discretionary cash flow. So we finally started buying it heavily at the end of the second quarter. We think the ADT security business is a sleeper and with just a little growth will turn into a cash-flow machine. We believe Tyco will achieve its goal of 12% free-cash-flow growth over the next several years -- with that cash-flow growth, stock buybacks and some P/E expansion, we're confident the stock can grow 50% within two or three years. This is an example of a "fallen angel" we didn't buy immediately but got to know over time and have been lucky enough to have another chance to buy.

As the shares of traditional media companies go nowhere, are any of them appealing?

Liberty Media

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is still one of our largest holdings. It has not been especially profitable the past few years, although that's hard to measure because they have spun out their international business and stake in Discovery Communications, so now we have three sets of shares. John Malone is both admired and criticized for his affinity for complexity, the lengths he'll go to avoid paying taxes and his desire to extract the maximum from any negotiation. We believe each of the three companies is undervalued and we'll earn good returns by waiting patiently for the values to be recognized. Incidentally, although we prefer to be buy-and-hold investors, Liberty is volatile enough that we have traded around our core position over the years -- usually buying around $8 and selling around $12 -- to earn some extra return.

Others like

Time Warner



News Corp.

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have been great companies, and we can't help but be interested. We're circling but aren't ready to buy. Each has some big unknowns. With Time Warner you have to come to grips with what AOL is worth. With News Corp. I've been leery of Rupert Murdoch. As Malone says about dealing with Liberty's stake, he has to find a solution that's good for Liberty, for News Corp. shareholders and for Rupert. That's a complication. Viacom will be two companies which need to be evaluated separately. There will be new CEOs of each, but Sumner Redstone probably won't be able to resist coaching from his chairman's seat.

The world is changing for "old media." Traditional advertising-supported businesses have been suffering, particularly as alternatives like paid search have taken off. There is competition from new forms of media and from piracy. They've struggled to find ways to be paid for their content delivered over the Internet. So these companies are not what they used to be. What they're going to be going forward may still be good, but we just haven't figured out what they will be worth.

This excerpt is from an interview published in the Aug. 29 issue of

Value Investor Insight

newsletter. For more information on

Value Investor Insight

, please visit To comment on this article,

click here.

Whitney Tilson is the co-founder and Chairman of Value Investor Media, Inc., and co-Editor-in-Chief of Value Investor Insight. He also for the past six years has successfully managed a number of value-oriented hedge funds, and recently launched two mutual funds.

John Heins is the co-founder and President of Value Investor Media, Inc., and co-Editor-in-Chief of Value Investor Insight. Prior to starting VIM, Mr. Heins was Senior Vice President and General Manager of America Online's Personal Finance business.