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By Michael Breen | 05-28-2009 01:16 AM

Weitz: How to Grow Comfortable with the Unloved

Weitz Funds' Wally Weitz and Brad Hinton discuss the discipline behind sticking with--and even adding to--two beaten-down positions against intense market pessimism.

Mike Breen: Greetings. This is Mike Breen of Morningstar coming to you from the 2009 Morningstar Investment Conference. We have got some of the best money managers in the business here. I am fortunate enough today to have Wally Weitz and Brad Hinton of the Weitz Funds from Omaha, a Buffettesque-type shop with a great long-term record. Welcome guys.

Wally Weitz: Thank you.

Brad Hinton: Thank you.

Breen: Wally, I know you were on a panel earlier this morning, so we are going to revisit some of the themes, but you guys have always kind of gone your own way, not worried about the market, pile into sectors where you will find bargains. There is one stock I thought maybe we can talk about that I think typifies that, and that is Redwood Trust, which is a mortgage REIT. So mortgage REIT, jumbo loans, California, it is the worst on the surface of anything...

Weitz: What could sound worse than that?

Breen: Yeah, yeah. What could be better than that? And now for the last year-and-a-half, you have kind of added to your position and then just participated in a sort of additional offering they had and that's done well. So, if you could walk us through why you were comfortable doing that with something that the entire market hated and you were willing to kind of keep adding to the position?

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