Weitz Investment Looks to Visa (V), Amazon (AMZN), Others for Big Returns After Subpar 2016

Amazon.com, Inc. (NASDAQ:AMZN)

Another stock that was on Weitz Investment’s Q4 buying list was Amazon. The fund anticipates that Amazon is poised to carve itself a material chunk of the worldwide retail market through its dominance of e-commerce, and that it has a long path of organic growth ahead of it. The fund is also bullish on Amazon Web Services, citing its profitability and share of the growing IaaS market.

On the retail front, The New York Post reported yon Sunday that Amazon.com, Inc. (NASDAQ:AMZN) is bandying about the idea of robot-staffed supermarkets that could have as few as three human workers on duty at any given time. The tentative plans theorize that the stores could achieve profit margins north of 20% thanks to the vastly reduced labor costs. Amazon was the second-most popular stock among the hedge funds in our system on September 30, being owned by 150 of them. It’s also been another strong performer for Weitz Investment in 2017, gaining 7.7%.

CVS Health Corp (NYSE:CVS)

The final new position discussed in Weitz Investment’s latest letter to investors was CVS Health Corp, a stock which the fund first bought in 2011 but largely sold out of during 2013 (a small number of remaining shares were sold in the first quarter of 2014). The fund’s timing on the sale was a little early, as CVS didn’t peak until mid-2015. Since then however, shares have given back most of those gains and opened up a re-entry point for the fund.

While Weitz Investment suspects that CVS won’t achieve any EPS growth this year due to client losses in 2016, it nonetheless found the stock attractive at the mid-$70 valuation level. After shooting above $80 in January, CVS shares have since fallen back to the $76 mark, down by 3.6% in 2017. 58 hedge funds that we track we long 2.2% of CVS’ shares on September 30.

Express Scripts Holding Company (NASDAQ:ESRX)

Lastly, Weitz Investment’s Q4 investor letter revealed that the fund sold out of its position in Express Scripts during the fourth quarter. That position had contained just over 1 million shares on September 30, and was the fund’s 14th-most valuable position at that time, worth $70.58 million. The fund is concerned that Anthem Inc (NYSE:ANTM) may not renew its deal with Express Scripts in 2019. The two companies are currently embroiled in a number of contentious battles, including lawsuits filed against each other, as well as lawsuits brought against both of them by others, which allege that they overcharged consumers for drugs by as much as $3 billion annually.

Given the growing uncertainty regarding its relationship with Anthem, the fund elected to close its position after the stock’s post-election rally in November. Shares have since slid by over 10% and are off by 2% in 2017. Joshua Packwood and Schuster Tanger’s Radix Partners also sold out of its small position in the stock during Q4, unloading the 5,609 shares that it had owned on September 30.

Disclosure: None