Following a reduction in October, Weitz Investment Management's Wallace Weitz (Trades, Portfolio) disclosed earlier this week he again trimmed his Intelligent Systems Corp. (INS, Financial) stake by 9.91%.
When picking stocks, the investor's Omaha, Nebraska-based firm combines Benjamin Graham's principles of price sensitivity and insistence on margin of safety with a conviction that qualitative factors that allow the company to control its destiny can be more important than statistical values like book value and earnings.
According to GuruFocus Real-Time Picks, a Premium feature, the guru sold 82,500 shares of the Norcross, Georgia-based software company on Dec. 31, impacting the equity portfolio by -0.16%. The stock traded for an average price of $40.11 per share. It now represents 1.42% of Weitz's equity portfolio.
GuruFocus estimates he has gained 3,657.87% on the investment since establishing it in the third quarter of 2009.
The software company, which provides technology solutions and processing services to the financial technology and services markets, has a $361.91 million market cap; its shares were trading around $40.53 on Wednesday with a price-earnings ratio of 37.53, a price-book ratio of 8.29 and a price-sales ratio of 9.97.
The GF Value Line suggests the stock is fairly valued currently, though the GuruFocus valuation rank of 3 out of 10 leans more toward undervaluation.
On Nov. 3, Intelligent Systems reported its third-quart financial results. It posted earnings of 31 cents per share on $10.3 million in revenue, which grew 8% from the prior-year quarter.
In a statement, CEO Leland Strange noted results were better than expected despite the ongoing Covid-19 pandemic and "demonstrated the continued resilience of our business, our strong financial position, and our unique product offering."
"During the quarter we substantially completed the anticipated investments in our infrastructure needed to ensure CoreCard exceeds current and future customer needs," he added. "These investments will place near-term pressure on margins but are needed to achieve our long-term strategic vision. As we stated earlier in the year, we anticipate these investments will translate to incremental revenue opportunities and drive growth for fiscal 2021 and beyond."
Boosted by healthy debt ratios and comfortable interest coverage, GuruFocus rated Intelligent Systems' financial strength 8 out of 10. The robust Altman Z-Score of 22.5 also indicates the company is in good standing.
The company's profitability did not fare as well, scoring a 5 out of 10 rating despite having strong margins and returns that outperform a majority of competitors. It also has a low Piotroski F-Score of 3, which implies operations in poor shape, and a business predictability rank of one out of five stars. GuruFocus says companies with this rank return an average of 1.1% annually over a 10-year period.
Weitz is Intelligent Systems' largest guru shareholder with an 8.4% stake. Jim Simons (Trades, Portfolio)' Renaissance Technologies, Chuck Royce (Trades, Portfolio) and Robert Olstein (Trades, Portfolio) also have positions in the stock.
Portfolio composition and performance
Roughly half of Weitz's $2.12 billion equity portfolio, which is made up of 65 stocks as of the end of the third quarter, is invested in the financial services and communication services sectors.
Technology stocks, which include Intelligent Systems, make up 16.14% of the portfolio. Other software companies Weitz holds include Oracle Corp. (ORCL, Financial), Fidelity National Information Services Inc. (FIS, Financial), Black Knight Inc. (BKI, Financial), Salesforce.com Inc. (CRM, Financial), Accenture PLC (CAN, Financial), ACI Worldwide Inc. (ACIW, Financial), Guidewire Software Inc. (GWRE, Financial) and Box Inc. (BOX, Financial).
According to guru's third-quarter shareholder letter, the Weitz Partners III Opportunity Fund posted a return of 7.59% for the three months ended Sept. 30, slightly underperforming the S&P 500's 8.93% return. Performance figures for fiscal 2020 have not yet been released.
Disclosure: No positions.
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