FRBSP - Weitz Investment Partners Value Fund Q2 2022 Commentary

• Weitz Investment Management focuses exclusively on asset management and provides clients with top-quality, personalized service. Over the past three decades, Weitz has leveraged its research driven approach to capitalize on investment opportunities that arise out of market inefficiencies.
• The Partners Value Fund's Institutional Class returned -14.94% for the second quarter.
• Year-to-date, the Fund's Institutional Class has returned -22.32%.
• Lower stock prices, of course, are also the silver lining. From these price levels, things don't have to go perfectly for our companies, and one certainty is that they won't.

The Partners Value Fund's Institutional Class returned -14.94% for the second quarter compared to -16.10% for the S&P 500 and -16.70% for the Russell 3000. Year-to-date, the Fund's Institutional Class has returned -22.32% compared to -19.96% for the S&P 500 and -21.10% for the Russell 3000.

It has been a rough six months for stock investors. Stubbornly persistent inflation at 40-year highs is a serious issue. The Federal Reserve has taken increasingly aggressive monetary policy steps to try to tamp it down. To date, the Fed has raised short-term interest rates three times, in larger increments than they have used in over 20 years. More rate hikes are on the horizon, and investors are concerned that the Fed won't stop until we have a recession. With this backdrop, prices for stocks and other risk assets continued to decline.

Bear markets are painful, but they are a normal and inevitable part of investing. Lower stock prices, of course, are also the silver lining. From these price levels, things don't have to go perfectly for our companies, and one certainty is that they won't. Our long-term confidence stems from the resiliency, adaptability, and durability of our portfolio companies. Our businesses are geared to survive and eventually thrive through tougher times. We look forward to reporting on their continued progress.

Berkshire Hathaway ( BRK.A , BRK.B ), Alphabet ( GOOG , GOOGL ), Liberty SiriusXM ( LSXMA ), Meta Platforms ( META ), and Vulcan Materials ( VMC ) were the Fund's largest quarterly detractors. The price declines largely reflected growing recession fears. Investors worried about the outlook for digital advertising (Alphabet and Meta), economically sensitive construction aggregates (Vulcan), and consumer discretionary spending (Liberty SiriusXM).

The story was similar at a raft of other companies whose stocks declined more than 10% during the quarter. While we may see some earnings resets, stocks are forward-looking and no longer reflect “blue sky” outlooks at these prices. Positive contributors for the quarter included Black Knight ( BKI , thanks to news of a potential buyout), LKQ Corp ( LKQ , due to strong operational execution), and Danaher ( DHR , because of a favorable entry price).

Meta Platforms, Alphabet, and Liberty SiriusXM were also the Fund's largest year-to-date detractors, with Liberty Broadband ( LBRDK ) and CarMax ( KMX ) rounding out the laggards list. We think all five stocks are priced at wide discounts to their business values, and we remain patient owners, as the potential upside should be worth the wait. Markel ( MKL ) was the Fund's only positive contributor in the first half with a modest, single-digit return. While the Markel team is doing a fine job, we trimmed our shares by more than 20% during the second quarter to reinvest in more discounted opportunities.

During the quarter, we sold the Fund's AutoZone ( AZO ) holdings at a substantial profit as the stock traded above our value estimate. Research analyst Jon Baker made an outstanding buy recommendation back in late 2020, and the stock has nearly doubled since then. AutoZone's management team has done a terrific job, the business is humming, and the stock has clear momentum in this economic and market environment.

While selling a winner with positive trends is not especially comfortable, our discipline combined with the wider opportunity set drove the decision. To echo AutoZone's famous jingle, we would gladly “Get in the Zone” again at the right price.

We bought a new position in life sciences leader Danaher as the broad market sell-off accelerated. We have owned Danaher for nearly five years in other Weitz strategies, and we are delighted to add it to the Fund at a satisfactory price. Danaher has strong competitive positions across life sciences, diagnostics, water analytics, and product identification. The company has a world- class management team guided by lean culture and the heralded Danaher Business System. Stay tuned for our upcoming Analyst Corner feature, where research analyst Nathan Ritz will outline our current investment thesis for Danaher.

We believe that investing in businesses of all sizes, using our Quality at a Discount framework, is an enduring advantage of a multi-cap strategy. Recent mid-cap additions such as Gartner ( IT ), AutoZone, Dun & Bradstreet ( DNB ), First Republic Bank ( FRC ), HEICO ( HEI ), IDEX ( IDEX ), and MarketAxess ( MKTX ) align with our collective vision for a successful “go anywhere” equity portfolio. If 2022's volatility continues, we think active managers with a broad mandate will have even more opportunities to add value and earn their keep.

Valuation remains our North Star, and we think our stocks are priced at increasing discounts to business value. Our current estimate is that the portfolio trades at a price-to-value in the high 60's — a level that suggests ample long-term return potential from both our mid- and large-cap holdings.

Top Relative Contributors and Detractors

Data is for the quarter ending 06/30/2022. Holdings are subject to change and may not be representative of the Fund's current or future investments. Contributions to performance are based on actual daily holdings. Returns shown are the actual returns for the specified period of the security. Additional securities referenced herein as a percent of the Fund's net assets as of 06/30/2022: AutoZone, Inc. 0.0%, CarMax, Inc. 3.5%, Dun & Bradstreet Holdings, Inc. 1.8%, First Republic Bank 2.3%, Gartner, Inc. 2.0%, HEICO Corp. 3.1%, IDEX Corp. 1.8%, Liberty Broadband Corp. 4.7%, Markel Corp. 3.5%, and MarketAxess Holdings, Inc. 2.0%.

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