Stock Market Investors

There is a big difference between betting on something and investing in meritorious companies with long holding periods. Although we are no longer shareholders of Berkshire Hathaway, Warren Buffett shared some wisdom with everyone recently. He made a reference to the stock market looking like a “church with a casino attached” and the stock market in general looking less than “ideal.” Through the lens of our missives of the last six months, we will unpack these thoughts. […]

Shell (SHELL NA) announced this week that they are acquiring ARC Resources (ARX CN). Arc Resources is a gas business in the Montney Region of Canada and is a name that the investors of Smead Capital Management are fairly familiar with. For our investors who aren’t familiar with this region, it’s often referred to as liquids-rich, meaning that there is great ability to extract natural gas liquids (NGLs) from wells there. When they get gas from those wells that don’t have a pipeline to get out of the basin, the gas sells at the local AECO price. When they get NGLs out of those wells, they sell at a price similar to WTI. If you’re reading this, you should be thinking, “Wait, so gas companies in the Montney aren’t in the gas business?” No. They make most of their money from the oil prices, like WTI. […]

[…] We are not bears on America, or on the capacity of markets to generate wealth over time. We are optimists about the arc of human enterprise, the ingenuity of capital markets, and the compounding power of patient ownership in exceptional businesses. We are not optimists about the near term, not because we enjoy that position, but because the evidence requires it. We believe the most likely outcome is not a catastrophe but a prolonged period of flat to modestly negative real returns for the passive index investor.